UK-headquartered speciality chemicals business Croda International has received Chinese regulatory approval to acquire a 65% equity interest in Sichuan Sipo Chemical, a non-listed natural speciality chemicals manufacturer based in Mianyang City, Sichuan Province, China. Completion of the transaction is subject to customary closing conditions which are expected to be fulfilled within the next few weeks.

The majority stake will be acquired from Sichuan Forever Holding and certain individual shareholders for a total consideration of £38.2 million, including £8 million of debt, subject to working capital, net cash and fixed asset adjustments. Sichuan Forever Holding will continue as the minority shareholder retaining a 35% equity interest in Sipo.

Sipo was established in 1993 and has approximately 300 employees. Sipo makes speciality derivatives from natural raw materials and its products include primary amides, novel fatty acids and speciality esters. In 2012 the business reported a turnover of £28 million and EBITDA of £3.1 million. A production facility, custom built in 2011, will provide additional capacity from the outset and increase Croda’s proximity to customers in the region, strengthening its existing operations across China and the Group’s overall position in Asia. Sipo will also consolidate Croda’s global leadership in fatty acid amides and add new technology that will enable the Group to expand its portfolio across a number of its core markets.

Apart from a small number of by-products, all of Sipo’s products will be sold through the Croda global sales network. Croda’s initial focus is to grow sales from its Performance Technologies business to the Polymer Additives and Lubricants sectors, with further opportunities in new markets expected to follow in due course.

Steve Foots, Chief Executive of Croda, commented, “This is a significant step forward in our strategy to increase Croda’s presence in fast growing and emerging markets. Sipo’s manufacturing capabilities together with our marketing expertise and sales force infrastructure are an exciting combination. We will have a stronger platform in niche markets and renewable technologies, which will allow us to develop our customer base and drive sales growth in Asia. Our broader footprint in China will also enable us to be more responsive to customer needs in this important region.”