Silverfleet's Prefere Resins final bids in view as shadow of Russian exposure lurks

A shortlist following second-round bids has yet to emerge but Rhone Capital-backed ASK Chemicals, The Jordan Company-owned chemicals company Arclin, and private equity bidder Paragon Partners remain interested in the asset, the sources said. Final bids are due between the end of March and early April, the first three sources said.

Prefere's equity story is coming under pressure as replacing phenol with lignin requires wood, a raw material supplied by Ukraine, Russia and other central European countries, the sources noted. With clients in Russia and business relations souring amid its war with Ukraine, some key business relations could be cut and raw material supply threatened, they said.

Due diligence is understood to be focusing on the nature of Prefere's exposure to the region going forward, the first source said.

"The devaluing of the rouble will have major repercussions on deals," the fourth source commented.

"Nobody has the jitters about this yet," the second source noted. "They have prepared for this in the sense that it is moving along irrespectively."

Prefere Resins and sellside advisor Houlihan Lokey have been touting the company's ESG credentials with its use of lignin, a natural substitute for the more conventional resins, as reported by Unquote sister publication Debtwire. Although the business today is still conventional, the natural product forms part of its business plan.

Financiers continue to pitch hard for a seat at the table to finance Prefere, which has a strong outlook and stable cashflows, and the debt package on Prefere is expected to be around EUR 180m to EUR 200m off expected EUR 45m of forward-looking EBITDA, as reported by Debtwire.

The company's EBITDA is being scrutinised due to the jump of around EUR 10m from FY21 to budgeted FY22, the first and third sources said. Parties are considering an EBITDA discount given this may be hard to justify, they said.

"EUR 45m of EBITDA is rich as it was previously EUR 38m," the third source said. "They got the extra money and can't explain where it's from so I reckon buyers will discount it and base valuation off the former figure."

The business is expected to sell in the EUR 300m to EUR 350m range, the first and fourth sources said. Vendor Silverfleet is looking for an enterprise value of around 9x EBITDA, as reported.

Non-binding offers for Erkner, Germany-based Prefere – a European market leader in the production and sale of phenolic and amino resins – were due on 21 February, with private equity Lindsay Goldberg also tipped among interested parties, as reported.

Silverfleet bought Prefere Resins in 2018, as reported.  The business generated more than EUR 220m revenue in FY17.

Houlihan Lokey declined to comment. Silverfleet, ASK, Arclin and Paragon did not respond to requests for comment.

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• Topics
• Exits
• Industrials
• DACH
• Mergermarket
• Houlihan Lokey
• Silverfleet Capital
• Germany
• Rhone Capital
• Paragon Partners GmbH