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PAI's Perstorp sells Capa to trade

Greg Gille
@unquotenews
10 December 2018

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Perstorp, a Swedish chemicals business backed by PAI Partners, has sold its Capa division to Ingevity for €590m.

US-based speciality chemicals company Ingevity will acquire Perstorp UK, including Perstorp's entire caprolactone business, which trades under the Capa brand. The vendor stated that the sale is in line with Perstorp's recent divestments, including its biofuels business and its Belgian site in Gent. Perstorp intends to better focus on its Polyol, Oxo and Feed businesses.

It emerged recently that Perstorp, which was hitherto in the portfolio of PAI Europe IV, would be transferred to a new fund managed by PAI Partners with Landmark Partners as lead investor. PAI reinvested in the transaction. In addition to the transfer, Landmark and the co-investors have committed around €130m to finance growth opportunities for Perstorp.

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 Standard & Poor's (S&P) upgrading the business to B- in July this year. The agency noted that the company had seen sustained growth in EBITDA and a 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.

Company
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.

Its Capa business focuses on caprolactone, which can be deployed across a variety of applications in adhesives, plastics, coatings, resins and elastomers. Its properties include added wear resistance, chemical resistance, UV resistance, gloss and adhesion. The Capa business generates revenues of around €150m.

People
Vendor (Perstorp) – Jan Secher (president, CEO).

Advisers
Vendor – HSBC (M&A); Allen & Overy (legal).