Kraton Wins Race for Arizona Chemical

Kraton Performance Polymers has won the race to acquire privately held Arizona Chemical Holdings for $1.37 billion in cash. Both companies are based in the US.

Seller of the business is AZC Holding Company, LLC, which is principally owned by investment funds managed by American Securities.

The Houston, Texas-based Kraton, once part of the Shell group, said Arizona Chemical’s high-value performance products and specialty chemicals derived from non-hydrocarbon, renewable raw materials are “highly complementary” with its own portfolio, particularly in markets such as adhesives, roads and construction, coatings and oilfield chemicals.

CEO Kevin M. Fogarty said his company’ shareholder will benefit from pretax synergies of $65 million, expected by 2018. With adjusted EBITDA margins exceeding 20% over the past five years and an attractive cash flow profile, he said Arizona Chemical has a stable and attractive margin profile. Moreover, the acquisition will create new opportunities for Kraton to expand its presence in its core markets, where more than 50% of Arizona Chemical's sales are directed.

Kraton will finance the purchase through debt facilities committed by Credit Suisse Securities (USA), Nomura Securities International and Deutsche Bank Securities. Subject to regulatory and other customary approvals and conditions, the acquisition is currently expected to close late this year or early next year.