DSM sells polymer intermediates and resins biz to CVC Capital

Royal DSM, the life sciences and materials sciences company, and CVC Capital Partners (CVC), one of the world's leading investment advisory firms, have signed an agreement as per which DSM’s activities in polymer intermediates (caprolactam and acrylonitrile) and composite resins will be transferred to a new company (provisionally called NewCo), in which CVC will have 65% stake and DSM will own the remain stake. 
 
Through this agreement DSM is estimated get net cash proceeds of Euro 300-350 million. Pro-forma third-party sales of NewCo in 2014 amounted to Euro 2.1 billion with a 2014 EBITDA of Euro 106 million. The enterprise value of the transaction is Euro 600 million plus an earn-out of up to Euro 175 million.
 
DSM will contribute its global caprolactam business (Europe, North America, its 60% stake in DNCC (China) and the caprolactam licensing business), DSM's acrylonitrile business and DSM's Composite Resins business including its 75% stake in JDR (China). DSM's 65% stake in the service organization Sitech Services held via its caprolactam and acrylonitrile businesses will also be transferred. DSM Engineering Plastics has secured at least 80% of its caprolactam needs for 15 years after closing via drawing rights to secure its strategic position and competitiveness, effectively maintaining DSM Engineering Plastics' backward integration.
 
For DSM, this proposed transaction is a logical step in the execution of its strategy as polymer intermediates (caprolactam, acrylonitrile) and composite resins no longer fit with its more resilient portfolio in nutrition and performance materials. The partnership with CVC allows DSM to further reduce the cyclicality of its portfolio, secure a long-term competitive supply position of caprolactam for DSM Engineering Plastics and fully focus on the nutrition, performance materials and innovation activities complemented by accelerated actions to improve efficiencies and reduce costs.
 
CVC will work with current management of these businesses to make NewCo a success. CVC sees these businesses as a solid platform with leading positions and substantial potential for future growth.
 
As a 35% shareholder in NewCo, DSM will be able to benefit from any improvements in the businesses that will become part of NewCo.
 
NewCo will continue to supply at least 80% of DSM Engineering Plastics' caprolactam needs in Europe and North America for the coming 15 years via a drawing rights contract, effectively maintaining DSM Engineering Plastics' backward integration. In China DSM Engineering Plastics will continue to be supplied by NewCo as today. 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. Pro-forma third party sales of NewCo amounted to Euro 2.1 billion in 2014 with an EBITDA of Euro 106 million, excluding non-controlling interests (DNCC, JDR and Sitech) of Euro 19 million and including the caprolactam licensing income.