The acquisition is a profitable and growing end applications business along with unique products and geographical profile among the crowded olefins space. It has a well-integrated assets base with an extensive infrastructure and future expansion possibilities. The area is adjacent to many USGC feedstock suppliers. The cash value of US$2.0 billion makes it the largest acquisition by Indorama Ventures ever and now our capital employed is nicely spread over plastic, chemicals and fibers. The transaction value translates to an EV/EBITDA of ~5.7x and is expected to add substantial synergies to Indorama’s existing 450kta Ethane/Propane Cracker and our 550kta EO/EG. IVL will now be integrated from Ethane to PET as well as the high-margin EO and PO derivative businesses.
This acquisition reinforces IVL’s Integrated Oxides and Derivatives (IOD) segment’s continued development as envisaged in our strategy announcement in February 2019 and includes much sought after portfolios of value-added EODs and Propylene Oxide (PO) Derivatives, each coming with its own strong market position. The acquisition comes with its own strong R&D and technical capabilities apart from portfolio of about 900 patents and other intellectual properties. Entry into Australia will further diversify Indorama’s geographic presence. The Huntsman and Indorama Ventures assets are managed by extremely talented people who together will forge a successful global footprint and leverage the financial and commercial skills of Indorama to create shareholder value.
The acquisition will provide unprecedented entry into global niche markets and industries serving consumer’s daily needs with a sustained growth rate of ~5%. These products are used in home & personal care consumer goods, such as detergents, cleansers, shampoo, furniture applications, automotive parts fuels and lubricants. IVL has significant understanding of some of these end markets through its Fibers and PET businesses. New and exciting businesses include agrochemicals such as herbicides and unsaturated polyester resins for coatings, particularly in marine use.
IVL is committed to extracting further synergies and opportunities, such as supply chain and procurement consolidation as well as lowering corporate overheads and SG&A. These synergy benefits will further boost EBITDA contribution by US$ 40M by 2021. Additional capex planned for the high value-added surfactants business will add incremental EBITDA of US$60M by 2022.
The transaction is funded by IVL’s internal cash flows and debt financing only and does not necessitate any equity dilution.
Mr. Aloke Lohia, Group CEO of Indorama Ventures, said, “I am excited to conclude this momentous deal with Peter Huntsman, a remarkable businessman, which will keep us both ahead of the curve and enhances our leadership in our chosen industries. I see this as IVL’s most strategic and ambitious deal as we set our goals and aspirations at the turn of this decade and as we groom ourselves into a global, diversified chemicals company with multiple integrated, and related earning streams.
“I would like to heartily welcome our new colleagues to the IVL family and I am confident that together we will drive this important business to generate significant value for all our stakeholders, reduce earnings volatility, and underpin IVL’s earnings growth opportunities for years to come.”
Lowenstein Sandler LLP acted as lead legal counsel to IVL, with the support of Chandhiok & Mahajan in India and Corrs Chambers Westgarth in Australia.
