Murray Johnstone Backs Jim Ratcliffe in Ineos Buyout

“Serial entrepreneur” Jim Ratcliffe heads a buyout team that has acquired Ineos Group from Inspec Group in a GBP90.5 million (ecu 135 million) deal. In 1992, Jim Ratcliffe left Advent International and, together with Dr John Hollowood, led the MBI/MBO of BP’s speciality chemicals division, forming Inspec Group. Inspec floated in 1994 and is currently capitalised at GBP500 million; the group acquired the divisions that form Ineos from BP Chemicals in 1995.

Ineos, based in Antwerp, is the leading European producer and supplier of ethylene oxide, glycol and speciality chemicals to the European market. Inspec’s board, no longer regarding these activities as core to the group’s main business, offered Jim Ratcliffe the opportunity to lead a buyout of the Ineos divisions.

Ineos, the largest private equity deal led by Murray Johnstone to date, has a number of unusual features, not least the fact that Jim Ratcliffe raised the funding package for the deal without the assistance of financial advisers.

Murray Johnstone led the funding, providing equity totalling GBP10 million through Murray Johnstone Private Acquisitions Partnership II, which invested GBP6.3 million, and Murray Ventures, which invested GBP3.7 million. The Murray Johnstone funds hold a minority stake. The exact equity structure is undisclosed, but director Arvinder Walia said “Management is heavily incentivised to maximise profits”.

Barclays Capital and BT Alex Brown placed a DM190 million (ecu 96 million) high-yield issue that made up a third of the total funding. The bullet repayment on this senior secured bond is due in 2005, giving Ineos considerable cash flow flexibility for future acquisitions to increase capacity. The choice of a Deutschmark-denominated bond enabled Ineos to benefit from an extremely competitive interest rate of 8.625% on the notes.

Barclays Bank arranged DM37.5 million of senior debt and a further DM22.5 million of working capital facilities.

The Ineos management team, headed by Jim Ratcliffe as CEO, comprises Karel Hermans, Jean-Pierre Etienne, Calum McLean, Andre Desutter, Paul Nauwelaerts, Antoinne Verrijckt, Nadine Verbinnen and Kerry Attwell Thomas. The Belgian senior managers have, on average, worked at the 405-acre Antwerp site for more than 20 years.

Ineos operates in three main fields: bulk commodity chemicals; speciality chemicals; and the provision of on-site services to third parties. Manufacturing takes place in Antwerp, while sales and marketing functions are centred at a UK head office. Last year, the businesses acquired in the buyout achieved EBIT of GBP19.1 million on turnover of around GBP133 million. The new owners plan to increase revenue by focusing on the speciality chemicals side of the business and by expanding the third-party operations.