M&As: Chase acquired by KKR for US$1.3 bn; Adnoc ups takeover price for Covestro to EUR11 bn & explores merger of Borealis/Borouge

Protective materials manufacturer Chase Corporation has announced that it has entered into a definitive agreement to be acquired by an affiliate of investment funds managed by global investment firm KKR for US$1.3 billion. KKR is making its investment in Chase through its North America Fund XIII. The investment builds on KKR’s investments in industrial businesses with technical, materials science capabilities, including Minnesota Rubber and Plastics, Charter Next Generation and Hyperion Materials & Technologies.

The all-cash deal includes the assumption of debt. KKR also will acquire all outstanding shares of Chase common stock for US$127.50 per share in cash. The transaction value implies a valuation of approximately 13 times trailing-12-months EBITDA.

“At Chase, we have always been deeply committed to continuously improving our operating performance while providing an outstanding customer experience,” said Adam P. Chase, President/CEO of Chase Corporation. “In KKR, Chase has found the right strategic partner with strong cultural alignment combined with the experience and resources to help support our mission and drive future growth.”

Once the deal closes, KKR will support Chase in creating an equity ownership program to provide all employees the opportunity to participate in the benefits of ownership of the company, according to a news release.

“This strategy is based on the belief that employee engagement is a key driver in building stronger companies,” said Chase Corporation.

Chase Corporation said its Board of Directors has unanimously approved the transaction and recommends that shareholders vote in favour of the transaction. The deal is expected to close in the fourth quarter of 2023, subject to the receipt of approval from the company’s shareholders and certain required regulatory approvals, “as well as the satisfaction of other customary closing conditions,” the company said.

The all-cash transaction is not subject to financing conditions.

Once the transaction is complete, Chase will be a privately held company wholly owned by an affiliate of KKR’s investment funds and will no longer have its common stock listed on any public market.

“Over its nearly 80-year history, Chase has established itself as a leader in highly-engineered protective materials and built a portfolio of trusted brands, while delivering outstanding customer service,” said Josh Weisenbeck, a KKR Partner who leads KKR’s Industrials investment team. “We look forward to supporting Chase on its next phase of growth through developing exciting new products, executing upon strategic acquisitions, and serving customers in growing end-markets, including critical applications in electronics, fibre optics and electric grid infrastructure.”

In other news, Abu Dhabi National Oil Co. (Adnoc), the state-owned energy giant seeking to expand its chemical operations through a series of ambitious deals, has boosted its takeover offer for German materials company Covestro AG to about EUR11 billion, according to reports.

Covestro had earlier rejected Adnoc's initial takeover proposal last month, saying the offer was too low.

Reuters had earlier reported that Adnoc had approached Covestro with a takeover proposal worth more than EUR10 billion.

Covestro, a maker of transparent polycarbonate plastics, as well as chemicals for insulation and upholstery foams, in April issued earnings guidance that reassured markets about its growth prospects. It also resumed a share buyback programme.

A combination would give energy giant Adnoc, also a maker of refined products and petrochemicals, access to more advanced materials that go into electric vehicles, thermal insulation for buildings as well as coatings, adhesives and engineering plastics.

It would also support Abu Dhabi's plans to diversify the economy away from energy.

Last year, Adnoc bought 25% of Austrian oil and gas group OMV, thus increasing Adnoc's holding in both European petrochemicals maker Borealis and Abu Dhabi-listed petrochemicals company Borouge.

Meanwhile, Adnoc has also issued a statement that following initial exploratory discussions, it has entered into formal negotiations with OMV, about the potential creation of a new combined petrochemicals holding entity, through the proposed merger of their respective existing shareholdings in Borouge and Borealis.

Borouge is listed on the Abu Dhabi Securities Exchange with 54% owned by Adnoc, 36% by Borealis, and 10% held by retail and institutional investors. Borealis is owned 75% by OMV with Adnoc holding 25%.

Adnoc is undertaking these negotiations as majority shareholder of Borouge, and OMV as majority shareholder in Borealis, with any final decision subject to Borouge’s, and other relevant parties’, governance processes.

The potential tie-up would create a global heavyweight with combined annual sales of more than US$20 billion.

OMV Chief Executive Alfred Stern said the transaction had "strong and compelling industrial logic".

"Combining the two complementary businesses would bring together Borealis' technological expertise, and specialty and sustainable polyolefins solutions, with Borouge's advantageous cost position and access to attractive markets," he said.

While a move for Covestro would mirror the expansion of other Middle Eastern energy and petrochemical players into European materials and plastics businesses, the potential merger of Borealis/Borouge would mark the next transformative milestone in Adnoc’s ongoing value creation and chemicals growth strategy.

(PRA)

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