Celanese and Blackstone Agree Acetate Tow Merger
US chemical company Celanese and private equity group Blackstone are to combine their global acetate tow businesses. Celanese will own 70% of the joint venture, with Blackstone taking the remainder.
The Texas-headquartered group will contribute its cellulose derivatives business unit, including its equity interest in existing jvs with China National Tobacco. Blackstone will contribute its Rhodia Acetow business bought from Solvay on Jun. 1 for about €1 billion. The New York-based investment firm also used to own Celanese, which it bought in April 2004, selling the remaining shares in 2007.
Revenues for the joint company are expected to be $1.3 billion this year (on a pro forma basis) with adjusted EBITDA margins of approximately 40%. According to investment bank Jefferies, the jv will have a geographic split dominated by Europe with 49%, followed by Asia with 31%, North America with 16% and rest of the world with 4%.
“This transaction gives us the opportunity to partially monetize cellulose derivatives and reallocate significant capital to higher growth businesses within Celanese to accelerate our growth momentum,” said chairman and CEO, Mark Rohr.
The combined group, which will employ around 2,400 people, will operate eight wholly owned manufacturing facilities and three existing joint-venture sites. It will be governed by a board comprising three directors appointed by Celanese and two by Blackstone. The board, management team and name of the new company will be decided at a later date.
The companies have secured commitments for $2.2 billion of debt on behalf of the jv. An initial dividend of about $1.6 billion will be paid to Celanese following the formation of the new group.
Commenting on the deal, Laurence Alexander, an equity analyst with Jefferies, said the merger creates a clear global leader, sets the stage for further industry restructuring and provides a near-term capital return. However, he warned that it does not fully allay concerns over longer-term free cash flow generation. “Longer term, Celanese may be able to explore exiting tow or diluting its stake below the consolidation threshold,” Alexander said.
The formation of the joint venture is subject to regulatory approvals and customary closing conditions, which will determine the timing of the closing. Acetate tow is used primarily as a filter in cigarettes.