In yet another high-profile chemicals deal-almost an oxymoron before 2003-The Blackstone Group agreed to acquire Celanese AG in a transaction valued at roughly R3.1 billion, or $3.8 billion.
Blackstone Vice Chairman Hamilton James points to the chemical industry’s relatively depressed values as the driving the interest from private equity players. “The chemical industry is one sector where the valuations have lagged behind. There have been a number of companies selling for pretty low multiples,” he said.
It was these low multiples that brought Blackstone to the chemical arena in 2003. The Celanese purchase represents its second big-ticket chemical deal, having participated in the $4.3 billion purchase of Ondeo Nalco. Apollo Management and GS Capital Partners also took part in the Ondeo Nalco transaction.
Other chemical deals that occurred last year include: Bain Capital’s $983 million LBO of SigmaKalon; Texas Pacific Group’s $800 million purchase of Kraton Polymers; Soros Private Equity’s $256 million buyout of PolymerLatex; and Arsenal Capital Partners’ $65 million acquisition of Rutherford Chemicals.
As a result of the Celanese buyout, shareholders will receive R32.50 a share, giving the company an enterprise value of R3.1 billion, which includes Celanese’s net debt and pension obligations. Blackstone intends to inject R380 million into the pension fund, which at last check accounted for R1.039 billion of Celanese’s debt. The company’s net financial debt stands at R446 million. To finance the deal, the firm has already received commitments from Morgan Stanley and Deutsche Bank, although no details about the arrangements were made available.
By most accounts, Blackstone got a pretty good deal for Celanese. In a research note to its clients, HSBC Bank Plc, said, “We believe [Blackstone’s] R32.50 per share offer for the group is relatively conservative given the company’s recovery potential,” and HSBCsuggested that a per-share bid of between R35 and R37 would better account for the company’s potential upside. Additionally, HSBC gave Celanese a break-up valuation of up to R36.90 per share.
The acquisition, which would represent the largest ever public-to-private offer for a German company, still needs a minimum of 85% shareholder approval for the deal to go through, and the transaction is also subject to passing antitrust clearances. Blackstone has already received notice from Kuwait Petroleum Corp.-a holder of roughly 29% of Celanese stock-that it intends to accept the tender offer.
In a prepared statement, Celanese said Blackstone would support the company’s management team and continue to follow through on its existing strategy. And Blackstone President and CEO Stephen Schwarzman said the firm sees “Celanese as an attractive vehicle for growth, with ongoing opportunities for operational enhancements and execution of strategic initiatives,” adding that that going forward, Blackstone would look at possible acquisitions and intends to continue the company’s restructuring efforts.
Blackstone did not otherwise comment on future plans for the business, but as of right now, most speculation points to possibly re-domiciling Celanese in the U.S., and eventually floating the company in an IPO. Celanese was a New York-based company prior to 1987 when it was acquired by Hoechst AG. Two years later Celanese was spun out from Hoechst but maintained its Frankfurt address, even as the company employs more than 10,700 workers in North America, and revenues from the U.S. make up roughly 60% of Celanese’s total sales.
Blackstone will use its $6.45 billion Blackstone Capital Partners IV fund for the transaction, and most expect the deal to be finalized near the end of the first quarter.