* To buy Netherlands-based activated carbon maker for $1.1
* To fund deal with cash and debt
June 21 Chemical maker Cabot Corp will
buy Netherlands-based activated carbon manufacturer Norit NV
from its private equity owners for $1.1 billion, narrowing its
focus on higher-margin specialty chemicals.
Leading chemical companies such as Dow Chemical Co,
German conglomerate BASF SE and Ashland Inc
are focusing on specialty chemicals, demand for which tends to
be resilient during economic downturns.
Specialty chemicals are widely used in water purifiers,
pharmaceuticals, skin creams, hair gels and cosmetics, while
commodity chemicals depend on cyclical industries such as
machinery, auto and construction.
Activated carbon is used to purify water, de-colorize sugar
and food products and improve the purity of pharmaceuticals,
among other things.
"This acquisition supports the ongoing transformation of our
portfolio to a higher margin, less cyclical, specialty
chemicals-focused company," Cabot Chief Executive Patrick
Cabot sold its supermetals business to Australia's Global
Advanced Metals last year as it began to focus on specialty
chemicals and carbon black.
"(The Norit deal) will provide us with further growth
opportunities in emerging markets and new customer-tailored
applications," Prevost told analysts on a conference call.
In addition to increasing its focus on specialty chemicals,
the new deal will also help it tap into the growing demand for
activated carbon to remove mercury from industrial emissions,
Last December, the Obama administration unveiled the
first-ever norms intended to slash mercury emissions from
coal-fired plants. The new rules are estimated to cost utilities
about $9.6 billion every year, according to the U.S.
Environmental Protection Agency.
Cabot sees demand of around 150 million pounds per year in
the mercury removal space at present. It expects demand to grow
about 30 percent annually over the next few years, touching 600
million pounds by 2017.
Cabot will buy Norit from affiliates of British private
equity fund Doughty Hanson & Co Managers Ltd and Dutch
investment firm Euroland Investments BV. Norit was acquired by a
group of investors led by Doughty Hanson in 2007.
Reuters reported in April that Norit, which had earlier
announced plans for a U.S. initial public offering, was also
looking at selling itself.
BIGGEST DEAL YET
Norit has 10 plants in the Americas and Europe that make
Cabot's Prevost said the company expects revenue growth at
Norit to be between 10 and 12 percent. Norit's revenue has grown
at about 12 percent annually in the last 5 years.
Norit, which sold its Clean Process Technologies unit to
Pentair Inc for 503 million euros last year, had sales
of $360 million and earnings before interest, taxes,
depreciation, and amortization of $92 million in 2011.
Cabot expects the Norit deal to add 20 cents to 25 cents per
share to its earnings, excluding one-time costs, in 2013.
Cabot will fund the deal with $200 million in cash and $300
million of borrowings. The company also plans to issue about
$600 million of long-term debt.
The transaction, which is expected to close by the end of
the year, requires approval from U.S. and German regulators and
consultation with the Dutch works council, representing
If completed, the Norit deal will be Cabot's largest to
date. Norit's CEO Ronald Thompson will continue to lead the
business after the deal, Cabot said.
J.P. Morgan was Cabot's financial adviser for the deal.
Cabot shares fell about 3 percent to $36.95 in early trade
on the New York Stock Exchange on Thursday.