Cognis sale nets 3x return for Permira and Goldman

The sale to trade buyer BASF will bring to an end nine years of private equity ownership for the specialist chemical business.

The €3.1 billion sale of chemicals group Cognis will net its financial sponsors, Permira and GS Capital Partners, 3x their invested capital, said a source with knowledge of the deal.
The buyer, German chemical conglomerate BASF, will acquire Cognis for an equity purchase price of €700 million. Including debt and pension obligations, the enterprise value of the transaction is €3.1 billion. It is expected to close by November 2010 at the latest, said a statement from BASF.
Cognis specialises in chemical products derived from renewable raw materials for the health and nutrition market as well as the cosmetics, detergents and cleaning industries. GS and Permira acquired the business in 2001 in a €2.6 billion carve-out from German chemical giant Henkel.
Jörg Rockenhäuser, partner and head of Permira’s German office, said the nine-year holding period for the asset was necessary, given the scale of change required after the carve out. “In the past nine years, the management team, with the support of the Permira funds, refocused the business and developed it into a world leading company in green chemistry. Such transformation takes time,” he told PEO.
Rockenhäuser went on to describe the deal as a “classic” private equity investment, in which the portfolio company is transformed over several years into an asset with “considerable strategic appeal” for corporate buyers.
The sale process attracted a number of strategic buyers, a source close to the process confirmed, including US group Lubrizol. Permira and GS spurned a higher offer of €3.2 billion from Lubrizol, having granted BASF preferred bidder status, according to a report last week on newswire Reuters.
Last year Cognis reported sales of around €2.6 billion and an EBITDA of €322 million, a statement from BASF said. 
SVG Capital, a limited partner in Permira’s funds, said the realisation would earn it £36.7 million (€44 million; $54 million) in distributions, representing an increase of £16.7 million on the December 2009 valuation of the holding.