JPMorgan Minds PQ Purchase –

Again targeting the chemicals space, JPMorgan Partners agreed to acquire PQ Corp. in a deal expected to close in the first quarter.

PQ, with annual sales approaching $600 million, is a maker of silicate zeolite and other materials serving the detergent, paper, construction and beverage markets. “PQ has a huge range of applications,” said Timothy Walsh, a partner at JPMorgan, adding that the company will continue to look at other applications to spur further growth.

The chemicals space has been a refuge for private equity in recent years, claiming a number of high-profile transactions, such as the Texas Pacific Group acquisition of Kraton Polymers and the Blackstone Group buyout of Celanese. JPMorgan, for its part, has been one of the more active participants in the space.

“In the last couple years there have been a lot of folks focusing on the industry,” Walsh said. “Chemical companies historically are known for having very good free-cash flows and are typically very leverageable.”

Given that specialty chemicals are not as cyclical as other industries, a number of buyout firms were drawn to the sector during the 2001-2002 timeframe. The fragmentation of the space also appeals to financial buyers that have consolidation opportunities in mind, and with ongoing restructuring in the industry, buyout firms continue to be flush with potential deals in the space.

“It’s very rare to find a family business of this size… The company has a significant market position all around the world,” said Walsh.

UBS and JPMorgan Securities, the advisors to JPMorgan, are expected to assist in the financing. Credit Suisse First Boston, meanwhile, ran the auction for PQ. JPMorgan used its $6.3 billion J.P. Morgan Partners Global Investors Fund LP for the transaction. Currently, the fund is more than 50% committed.