M&A moves in the materials world

Two multibillion dollar deals set the pace for plastics materials mergers and acquisitions in the first half of 2022.

In a major engineering resins deal, Celanese Corp. of Dallas acquired a majority of DuPont Co.'s Mobility & Materials unit for $11 billion in cash. The businesses being acquired have annual sales of about $3.5 billion. Officials with DuPont in Wilmington, Del., said that the sale price represents an enterprise value multiple of around 14 times the unit's 2021 operating EBITDA.

The deal includes a major nylon resin business but doesn't include DuPont's Tedlar fluoropolymer, Multibase silicone additives or Delrin acetal businesses. Celanese is the world's largest acetal maker.

The acquisition "is an important strategic step forward and establishes Celanese as the preeminent global specialty materials company," Celanese Chairman and CEO Lori Ryerkerk said.

Tom Kelly, Celanese EM senior vice president, added that the DuPont business "is a uniquely complementary specialty materials asset to EM, spanning product, geography and end-market."

The deal includes 29 global manufacturing sites and an intellectual property portfolio of about 850 patents. The business being acquired employs around 5,000 in manufacturing, technical and commercial roles.

Brands and materials involved in the sale include Zytel nylon, Crastin polybutylene terephthalate (PBT), Rynite high-performance nylon and filaments and Vamac and Hytrel elastomers. Nylon is a major part of DuPont's history. The firm began commercial production of nylon 6/6 fiber in 1939 at a newly built plant in Seaford, Del., about 90 miles from company headquarters in Wilmington.

In another major deal, Lanxess AG and global private equity firm Advent International joined forces to acquire Royal DSM NV's engineering materials business for almost $4 billion. The business being acquired has annual sales of about $1.6 billion.

Officials with Lanxess in Cologne, Germany, said the business is one of the leading global suppliers in high-performance specialty materials that address key market needs in electronics, electrical and consumer goods. Lanxess will contribute its own High-Performance Materials unit to the joint venture. HPM is a leading supplier of high-performance polymers, primarily to the automotive sector. That business has annual sales of around $1.6 billion.

Advent will hold at least 60 percent in the joint venture. Lanxess will receive an initial payment of at least $1.2 billion and a stake of up to 40 percent. Lanxess also has the option to divest its stake in the joint venture to Advent at the same valuation after three years. Lanxess CEO Matthias Zachert said that with the joint venture, his firm "will once again become significantly less dependent on economic fluctuations."

The DSM unit makes nylon, PET, PBT, copolyester and other materials. It employs 2,100 worldwide at eight production sites and seven R&D centers. Lanxess is a maker of specialty chemicals and plastics that employs 14,900 and posted sales of almost $7 billion in 2020.

The JV will include DSM sites in The Netherlands, China, India Belgium, Taiwan and Evansville, Ind. Lanxess sites included in the JV are in Germany, China, Belgium, India, Brazil; and Gastonia, N.C.

Boston-based Advent has $88 billion in assets under management. Its holdings include German acrylic resin maker Röhm GmbH.

In a related move, Avient Corp. of Avon Lake, Ohio, acquired DSM's protective materials business — including Dyneema-brand fiber — for nearly $1.5 billion. Avient at the same time announced plans to explore a sale of its distribution business.

"With the addition of Dyneema, we're at an inflection point and are going to explore ways to look for more shareholder value and become a pure-play specialty company," Avient CEO Robert Patterson said.

The deal continues Avient's focus on advanced composites, a strategy the company has been pursuing for 10 years. The transaction includes all of DSM's protective materials activities, the most important of which is Dyneema, an ultrahigh-molecular-weight polyethylene and the strongest human-made fiber in the world.

Estimated sales for the Dyneema business in 2022 are approximately $415 million. The business includes six production facilities, four R&D centers and approximately 1,000 employees.

Avient's distribution unit posted sales of $1.63 billion in 2021, ranking second among the firm's three operating units. The unit distributes resin and compounds for 21 suppliers, including Dow Inc., BASF SE and LyondellBasell Industries.

Geon Performance Solutions made two first-half deals. The Westlake, Ohio-based firm first acquired PVC compounder Roscom Inc. for an undisclosed price. Roscom makes flexible and rigid PVC compounds for indoor and outdoor applications at a site in Croydon, Pa.

Geon CEO Tracy Garrison said that Roscom "is an excellent fit" for Geon. Roscom officials previously said the firm operates about 80 million pounds of annual compounding capacity at the 80,000-square-foot Croydon site.

Geon then acquired PVC compounder Cary Compounds LLC of Manalapan, N.J., for an undisclosed price. Cary makes flexible and semi-rigid PVC compounds for wire and cable, profile extrusion, injection molding and other applications. Garrison said that the Cary name "has long been synonymous with quality and high-end formulas, dating back to Ken Cary, who started the business in 1999.

Cary's four production lines will be moved to other Geon locations. Geon is owned by investment firm SK Capital Partners. The 1,000-employee firm has annual sales of around $1.2 billion and includes one of North America's largest PVC compounding businesses.

Ascend Performance Materials of Houston, another frequent buyer, in the first half acquired the compounding business of Indian materials firm Formulated Polymers Ltd. for an undisclosed price.

The deal includes a manufacturing site in Chennai and several warehouses across India. Officials with Ascend in Houston said that the deal will establish the firm's first manufacturing base in the subcontinent and strengthen its global reach in electrical and e-mobility applications.

Formulated Polymers has operated for more than 30 years as a nylon compounder and is a licensee of Ascend's Starflam-brand flame-retardant nylon materials.

Ascend ranks as a global leader in nylon 6/6 resins and compounds. The firm has annual sales of more than $3 billion and — like Geon — is a unit of investment firm SK Capital Partners of New York. In recent years, Ascend has made several acquisitions, including buying a compounding plant in Mexico from DM Color Mexicana SA de CV in late 2021.

The number of resin, color and compounding deals declined from 36 in the first half of 2021 to 21 in the first half of 2022, a drop of 42 percent, according to P&M Corporate Finance in Southfield, Mich. Those deals made up only 11 percent of all plastics M&A activity in the first half of 2022 after representing 17 percent in the same period last year.

In other notable first-half materials deals:

• Liquid colorant supplier American Colors Inc. acquired Colorificio Migliavacca srl of Bergamo, Italy, for an undisclosed price. Sandusky, Ohio-based American Colors makes liquid colorants and specialty chemicals for paints, coatings, adhesives, composites, films and agriculture. Colorifico is a pigment dispersion maker that's been in business for more than 110 years.

• Leading European resin distributor Distrupol, a unit of GPD Companies Inc., acquired Oy Baritec AB of Finland for an undisclosed price. Oy Baritec is a distributor of resins, additives, adhesives and color concentrates. GPD CEO Paul Tayler said that the acquisition "further extends the presence of GPD and continues the execution of our growth strategy."

• PolySol Polymers Inc., a PVC plastisols maker in Desloge, Mo., purchased Indusol Inc. and relocated the custom compounder's production from Sutton, Mass., to Desloge. Terms of the cash deal were not disclosed. Indusol employed five at the 40,000-square-foot Sutton plant. PolySol employs 25 in North America.

• Material handling and logistics firm PSC Group acquired Thermoplastic Services Inc., a compounder and sheet maker in Dequincy, La. TSI reprocesses scrap resins into custom compounds that are sold into industrial, commercial and municipal applications, officials with PSC in Pasadena, Texas, said. TSI also makes a range of plastic sheet and distributes resin. TSI employs 40 in 150,000 square feet spread over several buildings in Dequincy. Its products mainly are based on high density polyethylene and polypropylene resins.

No purchase price was disclosed in the deal. Chris Lendo, PSC sustainability vice president, said that PSC is looking to make two to three deals similar to the TSI deal every year for the next two or three years.

• Materials veteran Andy Ubhi acquired a majority stake in Poly Compounding LLC, a toll compounder in Elgin, Ill. Poly Compounding specializes in highly engineered compounds and processes, especially for heat- and shear-sensitive applications. The firm employs 20 at a 25,000-square-foot location.

Ubhi already owns color concentrates maker Peacock Colors Inc. of Addison, Ill., which he acquired in 2018, and Vortex Liquid Color Inc. of Sheboygan, Wis., which he added in 2020. Poly Compounding is located about 30 miles from Peacock. Ubhi said he plans to keep both sites open.

• In the most unusual first-half materials deal, bioplastics firm Makamer Inc. merged with Hometown International Inc., a public company whose only business is a New Jersey delicatessen.

Los Angeles-based Makamer "specializes in creating 100 percent biodegradable plastics using hemp-polymers that are fully compostable within days to months leaving no trace toxins or microplastics behind," according to the firm's website. No production sites are listed on the website. The new company will operate as Makamer Holdings Inc.

According to published reports, investment firms acquired Hometown International for use as a special purpose acquisition company (SPAC). The firm's only asset is Your Hometown Deli of Paulsboro, N.J. In 2021, Hometown International reported sales of a little more than $25,000 — all from the deli — and a loss of almost $500,000. But the firm's per-share stock price of $14 in early April gave it a market capitalization of almost $110 million.