M&As: Uponor sells its shares in Phyn jv; Indorama Ventures to buy Brazilian surfactant company for US$1.3 bn

Finland-based pipe firm Uponor and Belkin International have signed a share purchase agreement for the sale of Uponor’s shares in Phyn, a water sensing and conservation technology company, to Belkin. Phyn was founded in 2016 as a joint venture between Uponor and Belkin, with both owning 50% of the company. The parties have agreed not to disclose the purchase price.

Uponor booked an impairment on Phyn’s valuation in its Q2 results.

“These five years have proven that Phyn is on the right path with its water leakage detection technology, yet market adoption has not reached the targeted levels. Uponor has not been able to leverage its strong presence in the wholesale channel optimally. Having only limited synergies with our building solutions businesses, we have decided to sell our stake in Phyn to Belkin,” comments Jyri Luomakoski, President/CEO, Uponor.

Uponor employs about 3,700 professionals in 26 countries in Europe and North America. In 2020, Uponor's net sales totalled approximately EUR1.1 billion. Uponor Corporation is based in Finland and listed on Nasdaq Helsinki.

In other news, Thailand chemical firm Indorama Ventures Public Company Limited (IVL) is to acquire Brazil-based Oxiteno S.A. Indústria e Comércio, a subsidiary of Ultrapar Participações S.A. The acquisition gives IVL a portfolio in high-value surfactants and extends its existing Integrated Oxides and Derivatives (IOD) business.

IVL will purchase Oxiteno for US$1.3 billion (subject to adjustments at closing), with a deferred payment of US$150 million in 2024. The transaction is subject to customary conditions to closing, including approval of relevant regulatory authorities. The transaction is expected to close in Q1 2022 and will be earnings accretive immediately. Financing is secured through deferred payment, using existing extra cash on our balance sheet, free cash flow generated from existing businesses, short term loans against working capital and the balance as long-term debt.

Oxiteno is an integrated surfactants producer, catering to highly attractive end-use markets in LATAM. The acquisition brings strong customer relationships in Brazil, Uruguay and Mexico, and substantial growth potential in attractive end markets, including the US through a new facility in Pasadena, Texas. Oxiteno has a ommitment to environmental governance, and its focus on lowering greenhouse gas emissions will also enhance IVL’s ESG credentials.

Through the acquisition, IVL will assume a market position in technologies catering to niche, IP-rich and value-added applications in home & personal care, agrochemicals, coatings and oil & gas markets. The surfactants market has seen consistent growth over the last decade, driven by trends in population growth, urbanisation and increasing hygiene awareness amid the Covid-19 pandemic.

With 11 manufacturing plants, customers in four continents, and an experienced management team, Oxiteno will complement Indorama’s footprint in the US and Latin America, while its five research and technology centres will add to IVL’s innovation credentials in green chemistry. The extended footprint has potential to drive expansion in Europe and Asia by leveraging on the surfactants business in Australia and India and IVL’s global presence in 34 countries. IVL expects to realise synergies of US$100 million by 2025 through portfolio adjustments, asset optimisation and operational excellence.

Oxiteno and Indorama Ventures both have family-business origins.

Aloke Lohia, IVL Group CEO, said, “This acquisition is a natural fit for us. We have a solid track record of continuously driving value for shareholders through successfully integrating 50 acquisitions over the past 20 years. With Oxiteno, we are creating a global leader in surfactants. By bringing our companies together, we are strengthening our customer value proposition, our market reach, and our experienced team. Like us, Oxiteno grew as a family enterprise with an entrepreneurial mindset.”

Oxiteno’s innovation-led HVA offering is a significant complement to IVL’s growth platform, and a key driver of IVL’s EBITDA projection over the next two years, which is 15% above the company’s forecast in January 2021. Together with IVL’s world-class assets, which were acquired from US-based Huntsman in 2020 (Spindletop transaction), the acquisition of Oxiteno will lead IVL’s newest business segment as a major high-margin growth driver alongside its traditional PET commodities business, creating a stronger and more resilient hybrid platform.

Oxiteno’s green chemistry innovation credentials also strengthen IVL’s ambitious sustainability objectives as a leader in PET circularity and bio-ingredients. Brazil is home to the largest inventory of ethanol, used to produce bio-ethylene to enhance PET sustainability.

Today, IVL is the largest producer of resin used in recycled PET bottles and aims to recycle a minimum of 750,000 tonnes/year of PET globally by 2025, investing up to US$1.5 billion to achieve this goal.

(PRA)

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