LONDON, UK: Croda International has signed a definitive agreement to sell the majority of its Performance Technologies and Industrial Chemicals (PTIC) businesses to Cargill Velocity Holdings Limited for an enterprise value of €915 million on a cash-free, debt-free basis.
Cargill Velocity Holdings Limited is a wholly owned subsidiary of Cargill Inc. The transaction follows a comprehensive strategic review of PTIC, announced in May 2021, to determine the best ownership structure to ensure the future success of the business.
The divested business, which represented 77% of PTIC’s 2020 revenue, is comprised of five manufacturing facilities, including the Gouda plant in the Netherlands, the Hull plant in the UK and Croda Sipo in China (a joint venture in which Croda owns 65), together with additional laboratory facilities supporting key aspects of the divested business’ activities in Smart Materials, Energy Technologies and Industrial Chemicals.
The consideration of €915m includes 100% of Sipo in the divested business. If the sale of 100% of Sipo cannot be realised, Sipo will be excluded from the sale, reducing the consideration by €140m.
The retained parts of PTIC will provide integral support to the Group’s Consumer Care and Life Sciences sectors. These retained activities will become the Industrial Specialties (IS) sector and play a key role in Croda’s integrated model. Going forward, IS will generate additional revenues from a new supply agreement, whereby Croda will supply certain ingredients from its retained manufacturing plants to the acquirer.
Similarly, the acquirer will enter a supply agreement to provide Croda with certain ingredients from the divested business’ manufacturing plants.
The divestment delivers Croda’s transition into a focused Life Sciences and Consumer Care company with these two sectors accounting for well over 90% of the Group’s 2020 adjusted operating profit following completion. Croda intends to reinvest proceeds from the transaction into faster growth areas, increasing its exposure to health care and further developing its position as a sustainability leader in consumer care and crop care markets.
The Group’s priority is to use capital released through the transaction for organic capital expenditure and take advantage of the significant growth opportunities available in these markets. This will be supplemented by potential acquisitions of disruptive technologies in existing and adjacent markets.
The Group will maintain its long-standing capital allocation policy, retaining an appropriate balance sheet and returning excess capital to shareholders if leverage remains below the target range of 1-2 times Group EBITDA and if sufficient capital is available to fund investment opportunities.
Croda International and Cargill are currently working together on the process to separate the two businesses, with completion of the transaction expected in Summer 2022.
The transaction is subject to receiving customary regulatory approvals but is not subject to approval by Croda’s or Cargill’s shareholders.
Steve Foots, Chief Executive of Croda International, said: “Today’s announcement completes our transition into a pure-play consumer and life sciences company. We will focus our capital and resources on delivering sustainable solutions and scaling our consumer, health and crop care technologies, leading to consistent sales growth and an even stronger profit margin.
“Cargill is a company with a distinguished history and strong values. Under its ownership, the divested business and our talented, hardworking employees can look forward to a bright future.”
Colleen May, President of Cargill’s Bioindustrial business said: “The bioindustrial space is a priority for Cargill, as we strive to support our customers with innovative, nature-based solutions that deliver real-world benefits. Combining our diverse, global supply chain and deep operational expertise with Croda’s extensive industrial business capabilities and broad bio-based portfolio will spark a new wave of innovation and create tremendous value for our customers.”
Performance Technologies and Industrial Chemicals (PTIC) is an excellent, world-leading business, with approximately 1,000 employees. It delivers industry-leading margins across the cycle through well invested manufacturing, innovation and sales operations, supported by a dedicated and experienced global team.
The business has a highly attractive portfolio, offering customers innovative, sustainable solutions in advanced technologies, and is focused on fast-growth markets in the circular plastic economy, electric vehicles and other renewable technologies. This strong technology portfolio supports leading market positions in automotive, polymer and food packaging applications.
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