New York private equity firm SK Capital Partners LP has bought the integrated nylon business of Solutia Inc., which ranks as North America's second-largest maker of nylon resin.
St. Louis-based Solutia will receive $54 million in cash and a 2 percent stake in a firm that will be formed to include the new business. SK will assume almost all of the nylon unit's liabilities, including employee and pension costs. Solutia will use the sale's proceeds to pay down debt.
The business being sold includes nylon resin — sold under Vydyne and Ascend trade names — as well as fiber, feedstocks and compounds. The unit employs 2,000 and had 2008 sales of almost $1.8 billion, while posting a pretax loss of $135 million.
The deal, set to close by April 30, includes production sites in Alvin, Texas; Decatur, Ala.; Greenwood, S.C.; Pensacola, Fla.; and Foley, Ala. Solutia has cut more than 400 jobs in Pensacola and Greenwood since late last year.
Solutia's nylon business “is a noncore division of a major public company with good assets, good customers and good technology that was caught up in tough economic times,” said SK Capital co-founder and managing director Barry Siadat, in an April 1 phone interview.
Demand is weak in the unit's major markets of electrical/electronic, automotive and construction, but opportunities will return with demand, Siadat added.
“We don't mind buying a business that's not now in favor, as long as it has products that are important and needed by its customers,” he said.
SK was formed in 2007 to invest in the middle-market specialty chemicals and health-care industries and made its first plastics purchase last year, buying sheet maker Aristech Acrylic LLC of Florence, Ky.
The firm plans to remain active in the M&A market during 2009, said Chief Investment Officer Clark Winter.