By: Michael Lauzon
November 20, 2013
Tobacco-market intensive firm Schweitzer-Mauduit International plans to acquire a stake in thermoplastics filtration specialties.
SWM announced Nov. 18 that it plans to buy DelStar Inc. of Middletown, Del., now majority owned by private equity company American Capital Ltd. of Bethesda, Md. The purchase price agreed to is $231.5 million subject to adjustments. SWM of Alpharetta, Ga., expects to complete the deal by year end.
DelStar has annual sales of about $110 million, mainly in the United States but it also is growing in Asia around its Suzhou, China, operation. Its major sales are in water filtration applications and reverse osmosis. It also sells specialty filtration products for industrial markets.
"The acquisition of DelStar creates an attractive growth platform in an adjacent business area for SWM as we greatly expand our presence in advanced materials, focused in large part on filtration," noted SWM Chairman and CEO Frederic Villoutreix in a news release.
Villoutreix said DelStar's financial performance is attractive. Sales and EBITDA have been growing at about 10 percent a year.
"The outlook for DelStar remains robust, with global demand for drinking water infrastructure expected to remain high for the foreseeable future," Villoutreix explained. But SWM isn't giving up on tobacco products like cigarette and cigar papers and reconstituted tobacco leaf.
SWM "remains highly committed to our core tobacco operations and customers, as tobacco will continue to represent the majority of our assets, revenue and cash flow," he stressed.
Other SWM markets are specialty industrial and printing papers and processed flax and hemp straw.
SWM logged sales of $185.3 million for the third quarter ended Sept. 30, down 5 percent from a year earlier. Operating profit fell 15 percent to $41.8 million. In reporting the results, officials stated tobacco is a challenging market and SWM plans diversification over the long term.
DelStar products include extruded netting, apertured films, melt-blown media, engineered composites, extruded cores, filtration specialties, and products for health care and a range of industrial applications. American Capital bought a majority stake in DelStar in 2005 for $114 million.
"The combined resources of both enterprises will strengthen our ability to pursue promising opportunities in our base business as well as potential acquisitions," stated DelStar President and CEO Mark Abrahams in a news release.
The boards of directors for both firms have approved the transaction.
DelStar’s manufacturing plants are in Middletown; Austin, Texas; Richland, Pa.; El Cajon, Calif., and Suzhou. It runs sales offices in Shanghai, China, and Bristol, England.