Kraton Performance Polymers, Inc. (Houston; www.kraton.com), a global producer of highly-engineered polymers, announced that it has entered into a definitive agreement to acquire all of the capital stock of privately held Arizona Chemical Holdings Corp. for a cash purchase price of $1.37 billion. Arizona Chemical is a leading global producer of high-value performance products and specialty chemicals derived from non-hydrocarbon, renewable raw materials. Arizona Chemical’s end-use market exposure is highly complementary with that of Kraton, particularly in markets such as adhesives, roads and construction, coatings and oilfield chemicals.
“This transformational acquisition will extend Kraton’s technology and market diversification, while substantially increasing profitability and free cash flow, creating a more robust platform for growth and value creation for our stockholders,” said Kevin M. Fogarty, Kraton’s President and chief executive Officer. “Our stockholders will benefit from identified pre-tax synergies of $65 million, which we expect to achieve by 2018. Arizona Chemical has a stable and attractive margin profile, with adjusted EBITDA margins in excess of 20% over the past five years and an attractive cash flow profile. On a combined basis we expect to generate free cash-flow of more than $450 million over the first three years of combined operations, which will be available for debt reduction and allocation to stockholders.”
“Kraton and Arizona Chemical are both well-respected, leading providers of high quality products and innovations in their respective specialty markets,” said Dan F. Smith, chairman of Kraton’s board of directors. “The fact that Kraton and Arizona Chemical have such a highly complementary market focus, coupled with a shared business philosophy fundamentally premised on product differentiation and portfolio shift to drive improved profitability, is what makes this such a compelling combination,” added Smith.
The acquisition is subject to regulatory and other customary approvals and conditions and is currently expected to close in late 2015 or early 2016.