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Ripplewood Brews Up Chemical Platform –

Ripplewood Holdings LLC this month agreed to acquire KRATON, the global polymers business of the Royal Dutch/Shell Group of Cos. Terms of the transaction were not disclosed. The Royal Dutch/Shell Group, which is owned by Royal Dutch Petroleum Co. of The Netherlands and Shell Transport & Trading Co. of London, retained Morgan Stanley Dean Witter to sell KRATON in an auction process. Ripplewood was advised by Chase Manhattan Corp., which will also provide senior debt financing for the transaction. The deal is expected to close in early December.

Ian Snow, a managing director at Ripplewood Holdings, said the firm has partnered with John Georges, the former chief executive at International Paper Co., to target investment opportunities in the chemical industry.

“One of the things that attracted us to the chemical industry is its size and the fact that it’s an industry going through dramatic restructuring,” said Snow.

Snow said there is a trend among large and diversified chemical companies such as Dupont and Monsanto that are pursuing life sciences and pharmaceutical strategy as opposed to their base chemical strategy to divest of its chemical businesses. “In addition, you have a number of the oil majors combining and focusing on their core refining operations and getting away from their specialty chemical operations. So as a result of all this movement, you have a lot of assets that are being sold by a lot of the diversified chemical companies and by the oil companies and there is tremendous opportunity for financial buyers to acquire world-class properties at fair prices,” he said.

The KRATON Polymers business manufactures thermoplastic elastomers, which are used in applications such as adhesives and sealants, asphalt/bitumen modification, footwear, and molded and extruded products. The business has manufacturing plants in the U.S., Europe, Asia and Latin America with annual revenues of approximately $600 million.

Ripplewood was attracted to KRATON’s ability to work with its clients and help them find creative new solutions and product areas, said Snow. “There is significant internal growth in the business as a result of the strength of its position in international markets. It is the leading participant in this industry by a large margin in terms of capacity and sales,” he said.

Snow added that the firm plans to use this company as a platform to expand both horizontally as well as downstream.

Other buyout firms such as Apollo Advisors LP, AEA Investors and Bain Capital Inc. are also pursuing investments in the chemical sector. Apollo agreed in July to acquire part of Royal Dutch’s epoxy resins business for an estimated $1.1 billion and AEA Investors and Bain Capital are in a bidding war for B.F. Goodrich Co.’s chemical business, which is being auctioned off by Morgan Stanley.