Solvay S.A

Transaction Type
Sellers
Buyers
Announce Date
Post Date
Estimated Price
$1,350.0MM
Description

Bought chemical company that supplies U.S. hydraulic fracturing companies.

Solvay S.A. is spending $1.35 billion to grab a California chemical company that supplies U.S. hydraulic fracturing companies with multiple products.

Solvay, based in Belgium, announced Oct. 7 that it was acquiring Chemlogics, based in Paso Robles, Calif. Solvay targeted the privately held company to pair with its Novecare business unit as it looks to gain a share of the market for products used by the oil and gas industry in shale plays. The company plans to serve stimulation, cementing, production and water-management needs.

Solvay paid a steep price for Chemlogics -- 10.7 times the company’s last 12 months of earnings before interest, taxes, depreciation and amortization (EBITDA).

Chemlogics’ expertise in friction reducers, non-emulsifiers and extraction technologies fit with Novecare’s knowledge of surfactants, natural polymers and eco-friendly solvents, Solvay said.

Chemlogics offers “lab-to-well” services to more 400 firms. Combined, the companies will make up a significant share of the fast-growing $8 billion U.S. oil and gas chemical market, Solvay said.

A Solvay spokeswoman told The Wall Street Journal the deal will give the company a 10% share of the U.S. market.

“This acquisition accelerates Solvay’s ongoing transformation toward an innovative chemical solution provider focused on high growth and strong margin businesses with a more balanced geographical and market presence,” said Jean-Pierre Clamadieu, CEO of Solvay in a news release. “Our expansion in the energy sector builds on our strategy to provide differentiated solutions addressing the sustainability challenges that society faces with an increasing number of consumers and scarce resources.”

The acquisition will be financed with available cash, but Solvay intends to issue hybrid bonds for about $1.35 billion to further strengthen its balance sheet. Solvay said the purchase would be accretive to its cash and earnings from year one.

Solvay said that the oil and gas chemicals market is poised for 6% growth and that Chemlogics was a leading player in products and services that facilitate oil and gas extraction, especially non-conventional.

The transaction is expected to be complete by year’s end.Chemlogics, founded in 2002, reported its last 12-month sales of about $500 million. The company has 277 employees. The company has shown annual double-digit EBITDA growth over the past five years. Its assets are located in the United States, including include three manufacturing sites with annual capacity exceeding 300 kilotons, eight formulation centers and six research and technical facilities.