Indian Rain Commodities to Buy German-Owned Ruetgers

23.10.2012 -

Indian industrial group Rain Commodities agreed to buy speciality chemicals group Ruetgers in a €702 million ($918 million) deal that would set a new record for an Indian takeover of a German-owned business.

The sale of the industrial pitch, oils and resins maker by buyout firm Triton also marks a rare success in a difficult market for private equity disposals.

The acquisition is more than €220 million larger than the previous record Indian acquisition of a German-owned asset, set in February 2006, when Dr Reddy's Laboratories bought Betapharm Arzneimittel, an Augsburg-based pharmaceuticals manufacturer, Thomson Reuters data shows.

Ruetgers is based in Belgium and the deal would also rank as the biggest-ever Indian acquisition there. Triton said it was expected to close in the first quarter of 2013.

Indian companies have targeted overseas assets in a number of major recent M&A moves - such as Indian Hotels's $1.2 billion bid for Orient-Express Hotels - but the Ruetgers deal would rank well ahead of anything previously purchased from a German seller.

Rain, which will partly fund the deal with an issue of long-term bonds, said Ruetgers would be complementary to its business geographically and by expanding its operations into tar distillation.

Ruetgers is one of a swathe of private equity deals that have been in the pipeline in Germany, as some investors move to sell some of their most mature companies.

Several such transactions have failed as owners are unwilling to sell for less than what they paid in the buyout heyday before the financial crisis.

Enterprise value

For this year, Ruetgers was targeting earnings before interest, taxes, depreciation and amortisation (EBITDA) of between €90 million and 100 million, on sales of 900 million, a source close to the company said.

The enterprise deal value of €702 million including debt, equivalent to an EBITDA multiple of 7.0 to 7.8 times, falls short of an average enterprise value of 7.6 time EBITDA among listed global chemical makers, Thomson Reuters StarMine data showed.

But fetching this price had been seen as a long shot, as Triton was temporarily left with just one suitor, financial investor Pamplona, which was not ready to pay more than €600 million, in what bankers described as a difficult sale.

"We are very pleased with Ruetgers' development over the past four and a half years under Triton's ownership," said Peder Prahl, a senior portfolio manager at Triton.

Ruetgers has seen revenue rise 25% since it was bought by Triton from German chemicals maker Evonik in 2008, Triton said.

Triton had previously been in talks with prospective industrial buyers, such as chemicals company Himadri, in Asia, where the coal tar industry is growing fastest, they said.

As Triton struggled to strike a deal, it prepared to take a dividend out of the German firm, a move that revived the interest of prospective trade buyers, banking sources said this month.

Goldman Sachs advised Triton on the sale and Citigroup advised Rain.