Landmark backs single-asset secondaries for PAI's Perstorp

Greg Gille
27 September 2018

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Perstorp, a Swedish chemicals business in the portfolio of PAI Europe IV, will be transferred to a new fund managed by PAI Partners with Landmark Partners as lead investor.

Co-investors, which remained unnamed in the press release issued by all parties, have backed the continuation vehicle alongside Landmark – some of these investors were already LPs in the PAI Europe IV fund, according to a source close to the situation. PAI will also reinvest "significantly" in the transaction. In addition to the transfer, Landmark and the co-investors have committed around €130m to finance growth opportunities for Perstorp.

A spokesperson for PAI declined to comment beyond details issued in the statement. Landmark could not be reached for further comment at the time of publication.

Perstorp was the last remaining asset in the PAI Europe IV portfolio, according to Unquote Data. PAI announced the final close of PAI Europe IV in 2005 on €2.7bn. The GP acquired Sydsvenska Kemi from IK Investment Partners via the fund that same year. The value of the deal was not disclosed, but was at the time understood to be around SEK 9.5bn. Goldman Sachs and Deutsche Bank led the financing and Svenska Handelsbanken and Nordea underwrote the senior debt.

The company went on to struggle with debt levels following the investment. The first reports of disposals in order to reduce the debt burden started emerging around 2012, and Unquote sister publication Mergermarket reported in 2015 that PAI was looking at all options, including a potential IPO, for the business. At the time, Perstorp had a net debt of SEK 11.25bn with an EBITDA amounting to SEK 1.5bn.

In 2016, a news report by Bloomberg stated that the IPO option had been abandoned, with the refinancing route being pursued instead.

Perstorp has seen its situation improve since then, with S&P upgrading the business to B- in July this year. The agency noted that the company had seen a sustained growth in EBITDA and reduction in leverage over the past several quarters. Perstorp's adjusted EBITDA grew to around SEK 2.4bn in the 12 months to July 2018, gradually translating into a reduction in the adjusted debt-to-EBITDA ratio to below 7x, down from historical levels of more than 8x, according to S&P.

Perstorp manufactures speciality chemical additives, notably for the coatings and resin industries. It employs 1,500 people across manufacturing units in Asia, Europe and North America. Sales amounted to SEK 13.6bn in 2017, with EBITDA excluding non-recurring items of SEK 2.1bn (up 20% year-on-year).