Investindustrial, Black Diamond buy Hexion PSR for $425m

Alessia Argentieri
29 September 2020

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Investindustrial and Black Diamond have carved out speciality resins business Hexion PSR from US-based diversified chemicals company Hexion for $425m.

The consideration of $425m includes $335m in cash and certain assumed liabilities. The remainder will consist of future proceeds based on the performance of the company.

The acquisition of Hexion PSR includes the phenolic speciality resin hexamine, as well as Hexion's Europe-based forest products resins divisions. The GPs bought the business on a 50/50 basis.

Investindustrial deployed capital from Investindustrial VII, which held a final close on €3.75bn in November 2019, surpassing its €3bn target.

The vehicle targets controlling stakes in companies operating in the consumer goods, industrial and healthcare services sectors. It invests in both lower-mid-market businesses with enterprise values of less than €200m and larger companies at the upper end of the market, with EV in excess of €500m.

It deploys tickets in the €50-100m range for its lower-mid-market deals and of around €350m for its larger deals. It also co-invests with LPs for larger and selective mid-market opportunities.

Hexion PSR is a global producer of phenolic speciality resins, engineered thermoset molding compounds and merchant formaldehyde, with a strong market position in North America and Europe. The company employs 900 staff and operates 11 manufacturing facilities, three research technology centres and four product support labs.

The business generated revenues of around $530m in the year ending on 30 June 2020.

With the support of its new investors, Hexion PSR intends to use the proceeds of the sale to boost its growth and further reduce its debt.

The transaction is expected to close in the first quarter of 2021. Credit Suisse acted as Hexion's financial adviser, while Paul Weiss Rifkind Wharton & Garrison provided legal counsel.

Black Diamond and Investindustrial said in a joint statement: "We are pleased to acquire these strategic assets, as these businesses boast globally recognisable brands and trademarks, including Bakelite, Durite, Cellobond and Resonance, as well as world-class facilities and a leading R&D and technical service platform."

The two GPs have partnered in the past, when they created Polynt-Reichhold by merging Investindustrial-backed Italian resins producer Polynt and US-headquartered competitor Reichhold, controlled by Black Diamond.

The Polynt-Reichhold deal was valued at an estimated €1bn. The GPs retained an equal stake in the new entity, representing a combined majority share. The merger created a speciality chemicals group generating a combined turnover of €2.1bn with €200m in EBITDA, with 45 facilities across North and South America, Europe and Asia, employing 2,500 people.

The acquisition of Hexion PSR was not made via Polynt-Reichhold. However, considering the strong synergies between the two businesses, a possible merger in the future remains a possibility.