Blog
18th September 2020
Evonik, the second-largest chemical company in Germany, and one of the largest specialty chemical companies in the world is acquiring the Porocel Group for USD 210 million to accelerate the growth of its catalysts business, sending its shares up over 1% to EUR 24.65 on Wednesday, 26th August.
Based in Houston, Texas (USA), Porocel offers the technology for highly efficient rejuvenation of desulfurization catalysts, which are in increasing demand to produce low-sulfur fuel. Rejuvenation reduces carbon-dioxide emissions by more than 50 percent compared with the production of new desulfurization catalysts. In addition, Porocel has the available production capacity, enabling Evonik to speed up the expansion of its existing business with fixed-bed catalysts.
“This acquisition is the next logical step in the strategic development of our portfolio. Our focus is on stable and high-margin specialty chemicals,” said Christian Kullmann, chairman of the executive board. “We are systematically expanding the share of our specialty businesses – and that at an attractive valuation.”
The purchase price (enterprise value) is 9.1 times adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) in 2019, which is an attractive valuation for a high-quality asset in the catalyst sector. Porocel generated sales of approximately USD 100 million and EBITDA of about USD 23 million in 2019. The EBITDA margin at around 23 percent is above Evonik's target range of 18-20 percent. Porocel has increased its EBITDA significantly in the last three years, driven by new product development through an expansion of research and development capabilities.
The deal is expected to close by the end of this year and is subject to approval by the relevant authorities.
Porocel’s global position strengthens the worldwide presence of Evonik’s catalyst activities. The complementary fit to Evonik’s existing catalyst portfolio and especially the available production capacities offer considerable growth opportunities.
Evonik expects to increase sales of the combined catalyst business to significantly more than EUR 500 million by the end of 2025 without the need for investment in new capacities.
Catalysts are essential for the production of many chemical products and for the production of clean fuels. The market is characterized by a broad spectrum of applications and robust growth of around 4 percent with low cyclicality.
“Sustainability and especially circular economy play a decisive role for us when it comes to acquisitions and the orientation of our portfolio,” said Claus Rettig, head of the Smart Materials division. “With the acquisition of Porocel, we are meeting increasing demand that is coming from a trend towards sulfur-free fuels as well as reducing CO2 emissions and saving resources. The catalyst rejuvenation process results in significantly less CO2 emissions than the manufacture of fresh catalysts while yielding comparable efficiency and at a much lower cost.”
“Our innovation power-driven by the talented team at Porocel is well suited to Evonik’s culture and we look forward to growing the business further together,” said Terence McHugh, president, and chief operating officer of Porocel.
The acquisition gives Evonik access to major customers in the refinery and petrochemicals sector. Porocel's core competence is an efficient technology for purification adsorbents, sulfur recovery catalysts, and hydroprocessing services highlighted by the rejuvenation of used desulfurization catalysts.
The transaction will be financed out of Evonik's strong cash position.
This is part of our Petrochemical Intelligence Hub. For more details about the service, please get in touch here.
Image Source: Evonik