Texas-based Kraton Performance Polymers has bought privately held Arizona Chemical Holdings Corporation for a cash purchase price of US$1.37bn. Arizona Chemical makes performance products and specialty chemicals for markets including tires, derived from non-hydrocarbon, renewable raw materials. Its end-use market exposure is said to be complementary to that of Kraton, particularly in markets such as adhesives, roads and construction, coatings and oilfield chemicals.
“This transformational acquisition will extend Kraton’s technology and market diversification, while substantially increasing profitability and free cashflow, creating a more robust platform for growth and value creation for our stockholders,” said Kevin M Fogarty, Kraton’s president and CEO. “Our stockholders will benefit from identified pre-tax synergies of US$65m, which we expect to achieve by 2018. Arizona Chemical has a stable and attractive margin profile, with adjusted EBITDA margins in excess of 20% over the past five years and an attractive cashflow profile.
“On a combined basis, we expect to generate free cashflow of approximately more than US$450m over the first three years of combined operations, which will be available for debt reduction and allocation to stockholders,” added Fogarty. “In addition, given the renewable nature of Arizona Chemical’s product and technology offerings, the complementary growth we foresee can be accomplished while reducing our overall exposure to hydrocarbon-based feedstocks.”
The acquisition is subject to regulatory and other customary approvals and conditions and is currently expected to close in late 2015 or early 2016.
Arizona Chemical will be exhibiting at Tire Technology Expo in Hanover, February 16-18, 2016.