PolyOne sells PP&S unit in €700m all-cash deal.
Petrotahlil :In a major compounding deal, PolyOne is selling its Performance Products & Solutions unit to SK Capital Partners for $775m (€700m) in cash. That unit includes one of North America’s largest PVC compounding businesses.
PP&S posted sales of almost $700m (€632m) last year, representing about 20% of total sales for Avon Lake, Ohio-based PolyOne.
The unit also make polypropylene-based compounds and provides contract manufacturing. It sells mainly into North American construction and automotive end markets.
SK is a New York-based private equity firm. It has become a major player in plastic additives through its acquisitions of part of Chemtura in 2013 and of SI Group last year. SK had operated the Chemura businesses as Addivant. The combined additives firm operates as SI Group.
In a news release, PolyOne CEO Robert Patterson said that his firm “conducted what became a very competitive bidding process for our PP&S segment.”
He added that “Ultimately, we determined that divesting the business to SK Capital Partners would provide greater flexibility to accelerate our specialty growth strategy and is in the best interest of customers, employees and shareholders.”
After the sale, Patterson said that PolyOne “can further refine our focus on investing in and growing our three remaining segments: speciality engineered materials; colour, additives, and inks; and distribution.”
Jack Norris, a managing director of SK Capital, said: “PP&S is a market leader with a rich heritage in the PVC and polypropylene compounding industry. We are excited about the opportunity to further strengthen the business through both growth and improvement initiatives, similar to how we’ve approached several other investments that were corporate carveouts.”
The deal is scheduled to close in the fourth quarter of 2019.
In 2018, sales at PP&S were up more than 2%, but the unit’s operating profit declined by more than 4%. PP&S operates 13 manufacturing sites — nine in the US, two in Canada and single sites in Mexico and China.
The PP&S business includes Geon-brand PVC compounds, which are one of PolyOne’s oldest legacy businesses. The materials first were made by rubber supplier BF Goodrich, which launched production of PVC resin and related compounds and end products in the 1920s before it began selling the materials to outside customers in the 1940s.
Goodrich spun off Geon as a separate business in 1993, with the firm later divesting its PVC resin business. Geon then merged with Cleveland-based MA Hanna Co. — a longtime mining firm that had transitioned into plastics — in 2000 to form PolyOne.
PolyOne expects to record a pretax gain of approximately $600m (€541m) at the time the sale is completed. Patterson said that, in the short term, proceeds from the sale will be used to pay down debt on PolyOne’s revolving line of credit and to reduce its overall net debt.
In 2018, PolyOne had sales of about $3.5bn (€3.1bn). The firm employs almost 6,900 worldwide.
Follow us on twitter @petrotahlil
END
