Arsenal Completes Sale of Flowchem

Arsenal Capital Partners has closed the sale of Flowchem, a manufacturer of pipeline performance products, to publicly-traded specialty chemicals company KMG (NYSE: KMG) for $495 million. Flowchem’s adjusted EBITDA was approximately $43 million over the past twelve months resulting in a purchase price multiple of 11.5x.

Flowchem, acquired by Arsenal in December 2013, is a provider of drag-reducing agents, related support services, and equipment to midstream crude oil and refined fuel pipeline operators. The company was founded in 2001 and is based northwest of Houston in Waller, TX (www.flowchem-dra.com).

Drag-reducing agents, also known as DRAs, are specialty chemicals injected into midstream pipelines to reduce friction near the pipeline walls and within the turbulent fluid flowing through the pipeline network. By lessening fluid turbulence in pipelines, DRAs optimize pipeline flow and lower pipeline operating costs by increasing throughput capacity and reducing operating pressure. Flowchem’s products include DRAs for light, medium or heavy crude oil, as well as DRAs engineered for refined fuel products. As the second largest DRA provider globally, Flowchem serves more than 50 pipeline operators worldwide, as well as midstream service providers and distributors.

“Flowchem is an example of Arsenal’s Specialty Industrials focus on building and growing solution-oriented businesses with differentiated technologies,” said John Televantos, Arsenal Partner and Co-Head of Arsenal’s Specialty Industrials Group. “Through its technology and market-focused approach, the company has supported the global pipeline industry in reducing costs and enabling the more effective transportation of oil. We are very pleased with the growth that Flowchem has generated during our ownership and with the management team’s contributions in this successful outcome.”

Arsenal Capital Partners invests in middle-market specialty industrial and healthcare companies that have $100 million to $500 million in enterprise value.  Industries of specific interest include specialty industrials and healthcare companies. Arsenal has $1.7 billion of committed capital under management. The firm was founded in 2000 and has offices in New York and Shanghai (www.arsenalcapital.com).

The sale of Flowchem represents the third sale by Arsenal Fund III in the last 12 months, following the sale of Kel-Tech, a manufacturer and supplier of oilfield production chemicals and services throughout the United States, to Clariant; and Chromaflo Technologies, a producer of proprietary, high-performance colorants and chemical dispersions, to American Securities.

KMG, the buyer of Flowchem, is a producer and distributor of specialty chemicals through three business segments: electronic chemicals, wood treating chemicals, and industrial lubricants. The company has annual revenues of approximately $300 million and is headquartered in Fort Worth, TX (www.kmgchemicals.com).

KeyBanc Capital Markets was the financial advisor, Kirkland & Ellis and Jones Day were legal advisors and ADI Analytics provided advisory services to Flowchem and Arsenal.

© 2017 Private Equity Professional | June 16, 2017