CVC buys 65% stake in Dutch chemicals firm

CVC Capital Partners has agreed to acquire a 65 percent stake in NewCo, a newly formed company built out of a division of Netherlands-based chemical business DSM.

The enterprise value of NewCo, which consists of DSM’s activities in polymer and composite resins, is €600 million plus an earn-out of up to €175 million. CVC will acquire a majority stake for between €300 million and €350 million, while DSM will hold a 35 percent stake in the company.

Financing of NewCo will be through an equity contribution from both shareholders, third party financing and a €100 million bridge loan provided by DSM, according to a statement.

For DSM, the transaction is a “logical step in the execution of its strategy as Polymer Intermediates (caprolactam, acrylonitrile) and composite resins no longer fit with its portfolio in nutrition and performance materials”, DSM said.

NewCo will continue to supply at least 80 percent of DSM Engineering Plastics’ caprolactam needs in Europe and North America for the coming 15 years via a drawing rights contract, effectively maintaining DSM Engineering Plastics’ backward integration. In China DSM Engineering Plastics will continue to be supplied by NewCo as of today.

CVC sees these businesses as a “solid platform with leading positions and substantial potential for future growth”, the firm said in the statement. Pro-forma third-party sales of NewCo in 2014 amounted to €2.1 billion with a 2014 EBITDA of €106 million.

DSM’s advisors on the transaction were Allen & Overy and the Valence Group. Advisors to CVC were Aon, Bain & Company, Citigroup, Clifford Chance, Deloitte, Environ, KPMG and McKinsey. Financing for the transaction, which is expected to complete in Q3, is being provided by Citigroup and Rabobank.