Euro Salt Co. Acquired By Seasoned LBO Team –

An investor group comprised of New York-based Castle Harlan, First Union Capital Partners and London-based CVC Capital Partners this month acquired Tiel, Netherlands-based Verdugt B.V., a chemical producer and distributor, from BP Amoco for approximately $100 million, including fees and expenses. The transaction was financed with senior debt provided by a syndicate that included Bankers Trust, ABN Ambro and Banque Nationale de Paris.

The deal not only represents the first European investment for Castle Harlan-as well as a team-up with an established European private equity group-but also builds on First Union’s experience in the chemical industry through its US Salt platform. In addition, the acquisition points to a trend of divestiture of non-core assets by the recently merged BP Amoco.

According to Jeffrey Siegal, a Castle Harlan senior managing director, the investor group contributed equity amounting to approximately 39% of the transaction value. Castle Harlan now holds a 39% stake in the company, while First Union has acquired a 35% interest. The remainder is held by CVC, with a 16% stake, Jacksonville, Fla.-based US Salt and its management, which holds approximately 8% stake, and a small percentage held by Verdugt management.

Cutting Down the Competition

The investor group benefited from what Mr. Siegal characterized as a very limited auction and was therefore able to acquire Verdugt for a six-times EBITDA multiple. According to estimates referenced by Mr. Siegal and compiled by BT Alex. Brown, the average multiple for a European chemical company is approximately 6.9 times EBITDA, while in the U.S. the multiple is 7.1 times.

Both Mr. Siegal and Jim Cook, a First Union partner, characterized the acquisition as being relationship-driven, depending heavily on the experience of Mark Demetree, chairman and chief executive of US Salt. “One of the reasons we did this deal was because of Mark Demetree’s involvement in it,” Mr. Siegal said, making note of Mr. Demetree’s past experience not only with US Salt, but also with Harris Chemical.

The involvement of CVC also aided in closing the deal and will be crucial in managing the company, as CVC has offices based in the Netherlands, Messrs. Siegal and Cook said. “For us, it was important that we had a local investor in the deal,” Mr. Cook said. “So we brought in Citicorp Venture Capital.”

Verdugt produces and distributes organic salts used in the food, pharmaceutical and agricultural industries. In addition, the company produces airport runway de-icers and agricultural feed additives, and also has the ability to create specialized contract chemicals for its clients.

Although Verdugt posted revenue of just $60 million last year, Mr. Siegal said the investor group was attracted by its strong annual EBITDA of approximately $15 million. The company’s efficiency and management team will be instrumental in using Verdugt as a platform to acquire businesses both in Europe and in the U.S.

According to Mr. Cook, the investor group already is looking at three potential add-on investments based in the U.S. US Salt likely will play an expanded role in Verdugt’s expansion, Mr. Cook said, but declined to comment further.

The deal brings Castle Harlan’s current fund, the $610 million Castle Harlan Partners III, L.P. to approximately 20% invested, Mr. Siegal said.

Also this month, Mr. Siegal and David Pittaway, both former Castle Harlan managing directors, were promoted to senior managing directors.