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CVC partners DSM's Polymer Intermediates business
Mar '15
Netherlands based, Royal DSM has partnered CVC Capital Partners (CVC) for DSM's activities in Polymer Intermediates like caprolactam and acrylonitrile and composite resins through the formation of a new company, provisionally called NewCo.

As per a Royal DSM press release, NewCo will be 65 per cent owned by CVC and 35 per cent by DSM and the joint venture will have 1,950 employees

The enterprise value of the transaction is €600 million plus an earn-out of up to €175 million and financing of NewCo will primarily be through an equity contribution from both, third party financing and a €100 million bridge loan from DSM.

Estimated net cash proceeds at closing to DSM is around €300-350 million and DSM will recognise an initial book loss of about €130 million after tax and non-controlling interests, as an exceptional item in the first quarter.

Pro-forma third-party sales of NewCo in 2014 amounted to €2.1 billion with a 2014 EBITDA of €106 million and closing, subject to customary conditions and approvals, is expected in third quarter of 2015.

DSM will contribute its global caprolactam business in Europe, North America, its 60 per cent stake in DNCC (China) and the caprolactam licensing business), DSM's acrylonitrile business and DSM's Composite Resins business including its 75 per cent stake in JDR (China).

DSM said its 65 per cent stake in the service organization, Sitech Services held via its caprolactam and acrylonitrile businesses will also be transferred.

According to DSM, DSM Engineering Plastics has secured at least 80 per cent of its caprolactam needs for 15 years after closing via drawing rights to secure its strategic position and competitiveness.

For DSM, this proposed transaction is a logical step in the execution of its strategy as Polymer Intermediates and Composite Resins no longer fit with its more resilient portfolio in Nutrition and Performance Materials.

The partnership with CVC allows DSM to secure a long-term competitive supply position of caprolactam for DSM Engineering Plastics and fully focus on the Nutrition, Performance Materials and Innovation activities.

CVC will work with current management of these businesses to make NewCo a success as it sees these businesses as a solid platform with leading positions and substantial potential for future growth.

As a 35 per cent shareholder in NewCo, DSM will be able to benefit from any improvements in the businesses that will become part of NewCo.

In China, DSM Engineering Plastics will continue to be supplied by NewCo and this secures an ongoing strategic and competitive position for the polyamide 6 business in which DSM is a global leader.

NewCo will operate as an independent company with three business units: Caprolactam, Acrylonitrile and Composite resins. (AR)

Fibre2fashion News Desk - India

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