IVL strengthens portfolio with $2 billion acquisition
Thailand’s leading global chemical company Indorama Ventures (IVL) has acquired Huntsman’s integrated oxides and derivative businesses with an investment value of US$2 billion (about Bt60 billion) and up to $76 million in pension obligations.
This investment will drive the company to achieve another milestone on its journey of planned growth into segments of Integrated EOs and the Specialty Chemicals portfolio.
Huntsman is a global leader in integrated Oxides (EOs) and Derivatives (EOD), operating a large, well-invested site on the US Gulf Coast (USGC) as well as in India and Australia.
This acquisition reinforces IVL’s Integrated EOs and Specialty Chemical segment’s growth trajectory and includes sought after value-added EODs and Propylene Oxide Derivatives.
The transaction will broaden IVL’s expertise of operating USGC Integrated Oxides facilities through operational excellence, differentiated formulations and technologies.
The purchase price is based on an enterprise value of US$2 billion and up to US$76 million in pension obligations, which corresponds to an EV/EBITDA multiple of 5.7. The deal accelerates IVL’s ability to achieve its stated goal to double its core EBITDA by 2023.
This acquisition is a profitable, resilient and growth business and is not competing in the otherwise crowded olefins space. It comes at less than 50 per cent of its replacement cost. It is a game changing acquisition for IVL, its largest ever and one of the biggest by a Thai company in the last decade.
The deal is earnings accretive within the first year of full operations. Synergy benefits will further boost EBITDA contribution from these assets by additional US$100 million annually by 2022. On a proforma basis, this acquisition adds 25 per cent to IVL’s 2018 core EBITDA
IVL's group chief executive officer Aloke Lohin said that this acquisition squarely fits into its growth segments of Integrated EOs and the Specialty Chemicals portfolio. The assets being acquired from Huntsman represent leadership in EO and PO derivatives, achieving additional revenue of $2.0 billion and an EBITDA margin of 18 per cent in 2018.
With this strategic acquisition IVL has a balanced portfolio of scale businesses, co-related and integrated, in global niche markets of defensive industries serving consumers daily needs and growing at around 5 per cent.
The transaction will be funded by internal cash flows and debt financing and does not necessitate equity dilution. The nature of IVL’s business model enables it to achieve visible, diversified and steady cash flows making it a unique world-class chemical company. This acquisition further enhances this uniqueness.
The transaction is expected to be completed by the fourth quarter of the year 2019, subject to regulatory approvals.
“This acquisition is a momentous propellant in our journey towards our stated goal of being a global, diversified chemicals company with multiple, and related earning streams. I am excited by this acquisition since it encompasses and has a straight fit to all the values and strategic intent that we have incorporated in the IVL model; serving high growth markets, resilient and defensive industry, integrated assets serving the value chain downstream, competent and passionate management, and proprietary technology and Intellectual property.," he said.
He added that the combination of its two integrated EO assets, primarily used in captive production of EO & PO derivatives, will boost earning streams and strengthen the company’s position with existing and new customers.
“I am confident that this important business will drive value for all our stakeholders and underpin IVL’s earnings growth opportunities for years to come,” Lohin said.
Peter Huntsman, Huntsman's chairman, president and chief executive officer said that they will be acquiring a strong EO/PO derivatives business with a very experienced workforce and management team. This is also a transformational opportunity for Indorama Ventures that provides them with hundreds of product grades and thousands of customers.
“Our Company looks forward to further developing a long-term relationship with IVL. I not only value this relationship, but the personal trust and friendship I have developed with Aloke Lohia.”
The Valence Group acted as exclusive financial adviser to Indorama Ventures. Legal advice was provided by Lowenstein Sandler and KPMG provided financial due diligence support.