On February 10, 2020, a US court dismissed a lawsuit filed by the Federal Trade Commission to block an acquisition
The court ruling recognizes the nature of PeroxyChem's specialty hydrogen peroxide business
The growth rate of environmentally friendly hydrogen peroxide and peracetic acid products is higher than the market average
Evonik Industrial Group Successfully completed the acquisition of PeroxyChem in the United States for 0 million. Previously, the competent court in Washington D.C. rejected the acquisition blocking lawsuit filed by the Federal Trade Commission (FTC). For Winco, this result is gratifying, "said Winco Chairman Kuliman. The court agreed with our views on the hydrogen peroxide market, especially the core advantages of PeroxyChem's product portfolio in the specialty application market, in the judgment. This acquisition brings us more growth opportunities, especially in the environmentally friendly disinfectant market
Evonik signed an agreement with One Equity Partners (the private commercial banking division of JPMorgan Chase) at the end of 2018 to acquire PeroxyChem. PeroxyChem is a producer of hydrogen peroxide (H2O2) and peracetic acid (PAA), holding a strong market position in high profit specialty applications. Except for the United States, antitrust authorities in other countries have approved this transaction. But in August 2019, the Federal Trade Commission filed a lawsuit to block the acquisition.
PeroxyChem CEO Bruce Lerner expressed satisfaction with the verdict: "Despite market uncertainty, our performance in 2019 remained strong. Despite the challenging economic situation, the company's sales and revenue continued to grow. The integration of the two companies' businesses will motivate employees to develop better solutions for customers
In 2019, PeroxyChem's sales reached approximately 0 million, with adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) exceeding million (2018 sales were approximately 0 million, with adjusted EBITDA of approximately million). Evonik's peroxide business also developed well in 2019. In recent years, Evonik has continued to focus on specialty chemicals strategically, which has led to the positive development of its peroxide business—— The business revenue continues to increase, especially with its 2019 EBITDA profit margin fully in line with the company's overall target range of 18-20%.
In order to comply with antitrust requirements, PeroxyChem's factory located in Prince George, British Columbia, Canada will be sold in due course. The factory mainly produces standard hydrogen peroxide products. For PeroxyChem and Evonik, the proportion of the factory's revenue to the overall company revenue is negligible.
Last year, through the divestment of its methyl methacrylate business, the financial situation of Evonik further improved, "said Ute Wolf, Chief Financial Officer of Evonik. According to the plan, we will use a portion of the revenue to selectively expand businesses with high profits, low cyclicality, high proportion of specialty products, and strong free cash flow
Thanks to the trend of sustainable development, the hydrogen peroxide and peracetic acid markets are currently developing well. Hydrogen peroxide is an environmentally friendly and resource efficient chemical. Due to its ability to only decompose into hydrogen and water during processing, hydrogen peroxide has become one of the purest and most widely used chemicals. Sustainable disinfectants are the main application areas driving demand growth. PeroxyChem's hydrogen peroxide and peracetic acid businesses focus on end users in the low cycle environmental protection, food safety, and electronic semiconductor industries.
In this context, PeroxyChem built a wastewater treatment plant using peracetic acid in Memphis, Tennessee, USA in 2019. Based on a long-term supply agreement with the city of Memphis, the factory will begin generating stable revenue in 2020. The capital expenditures of the factory have been fully borne by PeroxyChem. According to the contract agreement, given the successful completion and timely implementation of the project, the acquisition price has been increased from the initially announced 5 million to 0 million.
Given the strong complementarity between the global businesses of the two companies, Evonik expects a synergy of million in global operations after the merger—— Same as previously announced figures, especially in terms of operations and logistics, product portfolio expansion, and new technology research and development. The above-mentioned synergies will be fully realized by the end of 2022.
Based on the financial performance of 2019, the acquisition price (enterprise value) including synergies is approximately 7.6 times the annual adjusted EBITDA, and 9.9 times without considering synergies. The acquisition will have a positive impact on Evonik's adjusted earnings per share and free cash flow for the 2020 fiscal year. The transaction was completed on February 3, 2020. Starting from this date, PeroxyChem's business will be fully integrated into Evonik.
The acquisition business will be merged into the resource efficiency business segment of Winco. Integration will begin immediately.
PeroxyChem has a history of over 100 years and is headquartered in Philadelphia, Pennsylvania, USA. It has approximately 600 employees and 8 production bases worldwide, with its main base in North America and production factories in Germany, Spain, and Thailand. Evonik is one of the world's largest hydrogen peroxide producers. Its active oxide business line has decades of experience in producing hydrogen peroxide and related products, with 13 production bases worldwide.
