Evonik has successfully closed the acquisition of the US company PeroxyChem for US$640 million after the responsible court in Washington D.C. dismissed the lawsuit filed by the Federal Trade Commission (FTC) to block the acquisition.
Court Ruling Confirms Specialty Nature of Peroxychem's H2O2 Business
“
This is a very good day for Evonik,” says Christian Kullmann, chairman of Evonik's executive board. “
In its judgment, the court confirmed our view of the H2O2 and PAA market and, above all, the strong specialty focus of PeroxyChem's portfolio. The acquisition unlocks additional growth opportunities for us, especially in the market for environmentally friendly disinfectants.”
Bruce Lerner, CEO of PeroxyChem, is delighted with the outcome of the legal dispute, “
Despite the uncertainty, we posted a strong performance in 2019 and reported a further increase in sales and earnings in challenging economic conditions. Combining the two businesses will enable our motivated staff to develop even better solutions for our customers.”
To comply with antitrust requirements, the PeroxyChem site in Prince George (British Columbia, Canada) will be sold in due course. This site mainly manufactures H
2O
2 standard products. The proportion of earnings from this operation are negligible for both PeroxyChem and Evonik.
Market for H2O2 and PAA
The market for H
2O
2 and PAA is currently benefiting from the trend to sustainable products and solutions. Hydrogen peroxide is an environmentally friendly and resource-efficient chemical that splits into hydrogen and water during processing. It is therefore one of the purest and most versatile chemicals on the market. Demand is driven principally by the need for sustainable disinfectants. PeroxyChem's H
2O
2 and PAA business focuses on end-users in the environmental, food safety, and electronics semiconductor industries, where cyclicality is low.
Since the two global businesses are a good and complementary fit, Evonik expects to leverage an unchanged synergy level of US$20 million, especially in operations and logistics, expansion of the product portfolio, and launch of new technologies. The synergies should be fully realized by 2022.
The purchase price (enterprise value) including synergies is about 7.6 times the annual adjusted EBITDA, or 9.9 times before synergies (based on 2019 financials). The acquisition will have a positive impact on Evonik's adjusted earnings per share and free cash flow already in 2020. PeroxyChem will be fully consolidated from the closing date, February 3, 2020.
The acquired business will be integrated into the Resource Efficiency segment. Integration will start immediately.
Source: Evonik