NEW YORK (ICIS)--Private equity firm Advent International is exploring an engineering plastics merger involving the assets of Germany-based LANXESS and Netherlands-based DSM, according to sources in the financial community.
A managing partner at Advent International and an operating partner of Advent (former senior executive of a European chemicals company) are driving such a deal, but it is unclear whether it will happen, a source with knowledge of the situation told ICIS.
German newspaper Handelsblatt initially reported that Advent and LANXESS were preparing a joint bid for DSM's assets in late January.
DSM is reviewing strategic options for its Engineering Materials business as well as Protective Materials. These two businesses comprising its Materials segment had combined sales of €1.94bn and adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of €435m in 2021. While DSM does not break out sales for Engineering Materials anymore, in 2020 it reported revenue for this business of €1.2bn.
DSM Engineering Materials includes nylon, thermoplastic elastomers, polyphenylene sulphide (PPS) and polyethylene terephthalate/polybutylene terephthalate (PET/PBT) compounds used in automotive, electrical and electronics, building and construction, medical, food packaging and consumer goods.
The DSM sales process has already started with first round bids due in early April. Advent is working with LANXESS and they would be prospective bidders along with other strategic and financial buyers, said another source in the financial community.
LANXESS is carving out its High Performance Materials (HPM) business unit, which makes nylon, PBT and thermoplastic fibre composites for the automotive, electrical and electronics markers. Sales are in the low single-digit billion euro range.
One banker told ICIS last December that a private equity deal involving the engineering plastics assets of LANXESS and DSM would be a possibility.
“They’re separating it out and what they’ll probably do is go after the DSM business alongside private equity and create a new entity, which could go public at some point,” Telly Zachariades, managing director at Piper Sandler Chemicals, told ICIS at the time.
In February, US-based DuPont agreed to sell the majority of its Mobilty & Materials (M&M) business to US-based Celanese for $11bn. The businesses being sold have estimated 2022 sales of around $3.8bn.
Earlier in November, DuPont CEO Ed Breen talked about how private equity would be interested in DuPont’s engineering plastics assets along with those of DSM, with an eye towards combining them.
“Besides strategic interest, we think it’s an asset that private equity covets,” said Breen at the Young & Partners Senior Chemical Executive Conference in November.
“We also think private equity is salivating that DSM is getting rid of their resins business which is about half the size of ours. [There’s the potential to] create a powerhouse company with synergies,” he added.
A LANXESS spokesperson said it does not comment on market rumours. A DSM spokesperson said the company does not comment on speculation. Advent did not respond to an ICIS request for comment as of press time.
Focus article by Joseph Chang
Thumbnail shows automobiles, an important end market for engineered resins. Image by Slavek Ruta/Shutterstock