Target: Emerald Performance Materials LLC
Price: More than $1 billion
Multiple: More then 9x
Sponsor: Sun Capital Partners Inc
Buyer: American Securities LLC
The deal underscores private equity’s affinity for specialty chemicals companies, which can have higher margins and be less susceptible to economic swings than companies in the wider chemical sector, sister news service Reuters reported.
New York-based American Securities prevailed over other buyout firms in the auction for Emerald Performance, the people said prior to the announcement, cautioning that the deal had not yet been finalized.
The sources asked not to be identified because the negotiations are confidential. Sun Capital declined to comment, while American Securities and Emerald Performance representatives did not respond to requests for comment.
Emerald Performance, based in Cuyahoga Falls, Ohio, produces chemicals used in food flavorings and fragrances, as well as industrial applications. Boca Raton, Florida-based Sun Capital created Emerald in 2006 out of businesses it bought from Lubrizol Corp, a chemicals maker specializing in lubricants for engines. Warren Buffett’s Berkshire Hathaway Inc took over Lubrizol for $9 billion in 2011.
Lubrizol said in a regulatory filing in 2006 the sale of the businesses that would become Emerald Performance resulted in cash proceeds of about $269.7 million. Accounting for the debt of Emerald Performance both at the time of its creation and its impending sale, Sun Capital stands to make more then 9x times its money on the deal.
American Securities is itself no stranger to the chemical sector. Last December, it agreed to sell General Chemical Corp to Canada’s Chemtrade Logistics Income Fund for $860 million.
Greg Roumeliotis is a correspondent for Reuters in New York.
UPDATE: This story has been updated following Sun Capital’s announcement of the agreement.