In a two-day whirlwind, plastics additives leader Chemtura Corp. announced an expansion of its antioxidants and ultraviolet-light stabilizers businesses and found a buyer for its PVC additives unit.
Middlebury, Conn.-based Chemtura which has been under Chapter 11 bankruptcy protection since March 2009 said Feb. 22 it will increase its capacity for antioxidants and UV-light stabilizers to position itself for growth in growing markets.
Today's leading polymer producers require their suppliers to supply product globally and be committed to innovation, said Peter Smith, head of antioxidants and UV stabilizers.
As part of the initiative, Chemtura plans to add capacity for alkylated phenol, the key raw material for antioxidants, adding new capacity and a new range of specialty alkylated phenols at its site in Catenoy, France. Alkylated phenols are used as intermediates in a number of Chemtura products and also are sold in the marketplace.
Chemtura also plans to produce its new Weston 705 antioxidant for styrenics at multiple sites around the world. The product already is being made in the U.S., company spokesman John Gustavsen said Feb. 24 via phone.
Along with Everspring Corp. of Taiwan, Chemtura has developed and recently began manufacturing a range of phenolic antioxidants suitable for use in polyurethanes and other polymers. Chemtura also is expanding its own capacity of phosphite antioxidants, also for styrenics, with additional capacity in Asia and the Middle East.
Chemtura declined to provide the size or cost of the expansions, Gustavsen said.
These aren't risky moves; this is part of our business plan, he said. We're demonstrating that our performance during the Chapter 11 part of our history shows a normal course of business.
After announcing the capacity expansions Feb. 22, Chemtura on Feb. 23 confirmed it would sell its PVC additives business to Indian investment firm Artek Aterian Holding Co. LLC for $16.2 million in cash.
In late December, Chemtura had identified New York private equity firm SK Capital Partners LP as the stalking-horse bidder for the PVC additives business, with an offer valued at about $45 million. Most of that amount consisted of assumed liabilities.
Artek Aterian emerged as the winning bidder from a group of five parties. Bidders went through 36 rounds of bidding over a 16-hour period Feb. 22-23, according to a Bloomberg report.
The PVC additives business had sales of $374 million in 2008 and $177 million in the first nine months of 2009. Artek Aterian is backed by Indian chemical firm Artek Surfin Chemicals Ltd. and New York investment firm Aterian Investment Partners Distressed Opportunities LP.
Artek Surfin Chemicals is a Mumbai-based company that specializes in metal-finishing chemicals. Gustavsen said Artek Surfin is neither a customer nor supplier of Chemtura.
Aterian Investment Partners is a private equity firm that invests in small- and middle-market companies that are financially or operationally constrained, with annual sales of $25 million to $500 million and strong market positions, in need of up to $50 million of capital.
Aterian Investment founder Michael Fieldstone said by phone Feb. 24 that he could not comment on specifics of the deal until after it closes in the second quarter of 2010. But Fieldstone did say that his firm has previous experience in the chemicals market.
Mergers and acquisitions expert Bill Ridenour said the flurry of activity surrounding the sale of the Chemtura PVC additives business demonstrates some buyers are only interested in bargains.
Chemtura's business was clearly distressed, said Ridenour, president of Polymer Transaction Advisors in Newbury, Ohio. SK was a good buyer, but unless they had another PVC business, I don't know why they'd be interested.
If you're doing a deal like this without any direct synergy, it's just a bargain.
Artek Aterian may look at the business and decide they can restructure it and make it more effective, Ridenour added.
Some M&A watchers have said plastics M&A activity improved in 2009 vs. 2008, but only because of distressed deals.
We could see this type of [distressed] activity through the second quarter and maybe even beyond, Ridenour said.
In the first nine months of 2009, Chemtura posted a loss of $203 million as sales fell 34 percent to $1.9 billion vs. the same period in 2008. For full-year 2008, the firm lost $1 billion on sales of about $3.6 billion.
Sales in Chemtura's Industrial Performance Products unit which includes antioxidants and UV stabilizers fell 38 percent to $720 million in the first nine months of 2009. The unit's operating profit fell 42 percent to $55 million in that same period. In addition to plastic additives, Chemtura makes specialty chemicals, including urethane pre-polymers, as well as chemicals for crop protection and pool, spa and home care products.
At the time of its bankruptcy filing, Chemtura blamed declining orders and reduced liquidity as a result of the global recession. The company has struggled financially since its creation in 2005 from a merger of Crompton and Great Lakes Chemical Corp. Chemtura generated about 45 percent of its sales from plastic additives in 2008.
Chemtura recently received an extension from bankruptcy court that will allow the firm to file its reorganization plan in the summer of 2010.
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