Archives for November 30, 2021

Publicly traded Cabot Corporation has agreed to sell its purification solutions business, Norit Activated Carbon, to One Equity Partners for $111 million.

Norit is a manufacturer of over 150 different activated carbon formulations including powdered activated carbon, granular activated carbon, and extruded activated carbon.

Activated carbon, also called activated charcoal, is a form of carbon that has been processed to create millions of tiny pores between the carbon atoms, resulting in an increased surface area which makes the material suitable for adsorption, a process by which impurities are removed from fluids, vapors or gas.

Norit’s products are used to remove pollutants, contaminants and other impurities from water, air, food and beverages, and pharmaceuticals. The company’s activated carbon products are also used as colorants, carriers and catalysts in industrial processes. In addition to its activated carbon products, Norit also provides a range of on-site systems and services, including carbon reactivation services. Norit operates two facilities in North America, five facilities in Europe and participates in three joint ventures in Canada, Asia and Mexico.

“This pending partnership with OEP is the beginning of an exciting new chapter for Norit,” said Imtiaz Kathawalla, a vice president and general manager of Norit. “The senior management team and I are eager to collaborate closely with OEP’s professionals and tap their experience in support of our growth through geographic expansion, product offering diversification, technology innovation and strategic acquisitions.”

According to Norit, the global activated carbon market is expected to grow at a 9% CAGR due, in part, to increased regulatory standards around air purification, water treatment, renewable natural gas purification and pharmaceutical drug production.

In fiscal 2021, Norit generated $257 million in revenue and $26 million in EBITDA (down from $27 million in 2020). Based on a $111 million purchase price this equates to a 4.3x EBITDA valuation multiple.

“We are proud to make this investment in Norit, whose product offering uses renewable materials to increase access to clean air and water,” said Joe Huffsmith, a managing director at OEP. “Norit has been a leading player in the activated carbon space for over 100 years, and we feel fortunate for the opportunity to partner with the Norit team on this next phase of the company’s growth and development.”

OEP is a middle-market private equity firm focused on the industrial, healthcare, and technology sectors in North America and Europe. OEP spun out of JPMorgan in 2015 and has closed more than 300 transactions worldwide since its founding in 2001. The firm has offices in New York, Chicago, Frankfurt and Amsterdam.

“We are pleased to have reached an agreement with OEP as they have a proven track record of advancing market-leading industrial companies and are committed to the future success of the business,” said Sean Keohane, the CEO of Cabot. “At the same time, this transaction will allow us to focus resources on our core business segments and invest in areas where we see strong future growth and innovation potential for Cabot, such as battery materials.”

Boston-headquartered Cabot Corporation (NYSE: CBT) is a specialty chemicals and materials company that supplies rubber and specialty carbons, activated carbon, elastomer composites, inkjet colorants, conductive compounds, silica and aerogel products.

Credit Suisse is the financial advisor to Cabot, and PNC Bank is providing debt financing to support the acquisition of Norit by OEP. This transaction is expected to close by the end of the first quarter of 2022.

© 2021 Private Equity Professional | November 30, 2021

USALCO, a portfolio company of H.I.G. Capital, has merged with G2O Technologies, a business unit of CPS Performance Materials, a portfolio company of Arsenal Capital Partners.

CPS Performance Materials was formed by Arsenal in August 2017 to acquire publicly traded and Florida-headquartered Cyalume Technologies for $45 million. In October 2018, CPS closed the add-on acquisition of Florida-based Far Chemical from Edgewater Capital Partners, and in September 2019 it acquired Pennsylvania-based GEO Specialty Chemicals. Today, CPS operates under two segments; CPS Specialties which focuses on specialty coatings, medical devices, eyecare materials, pharmaceutical intermediates, nutrition, and water treatment products, and G2O Technologies.

G2O Technologies is a provider of specialty chemicals – including aluminum and iron-based coagulants, organic polymers and customized blends – used in the potable, industrial, and wastewater treatment sectors. The company is headquartered in Phillipsburg, New Jersey and operates 15 manufacturing and distribution facilities throughout the United States and in Puerto Rico. G2O was formed in 2020 through the merger of the water treatment divisions of Gulbrandsen and GEO Specialty Chemicals.

Baltimore-headquartered USALCO (United States Aluminate Company) is a manufacturer of aluminum-based chemicals – including aluminum sulfate and poly-aluminum chloride – that are used in water and wastewater treatment processes; and a manufacturer of alumina powder catalysts used by refineries to make fuels from lower-quality oils and heavier distillates.

H.I.G. first invested in USALCO in June 2020 and has closed three prior add-on acquisitions with the buys of California and Ohio-based sister companies AlChem Specialties and CalCHEM Specialties in December 2020; and the Texas-based water treatment business of Altivia in September 2021.

With the closing of the USALCO/G2O merger, Ken Gayer, the CEO of USALCO, will lead the combined company which will operate under the USALCO name with 27 sites extending from California to Puerto Rico.

“This merger marks an exciting milestone for our customers, employees, and stakeholders who depend on our services,” said Mr. Gayer. “Our complementary products and broader geographic reach will allow us to offer an expanded set of solutions that help improve our customers’ water treatment processes and protect our water resources.”

“We are very excited about the combination and look forward to partnering with Arsenal,” said Keval Patel, a managing director at H.I.G. “This is a transformational step in USALCO’s strategy of becoming a leading provider of specialty water treatment solutions in North America.”

Twin Brook was the administrative agent on the debt financing to support the merger of USALCO and G2O. Chicago-based Twin Brook focuses on loans to private equity-owned companies with EBITDA between $3 million and $50 million, with an emphasis on companies with $25 million of EBITDA and below. The firm targets senior financing opportunities up to $200 million, with hold sizes across the platform ranging from $25 million up to $150 million. Twin Brook’s products include opportunistic investments in second lien, mezzanine, and equity co-investments.

H.I.G. specializes in providing debt and equity capital to small and medium-sized companies and invests in management buyouts, recapitalizations, and corporate carve-outs of both profitable as well as underperforming manufacturing and service businesses. In September 2020, H.I.G. held an above-target close of H.I.G. Capital Partners VI LP with aggregate capital commitments of $1.3 billion. H.I.G. was founded in 1993 and is headquartered in Miami with additional offices in New York, Boston, Chicago, Dallas, Los Angeles, San Francisco, and Atlanta.

“This partnership will accelerate the technology and innovation advancements in the water infrastructure sector,” added Roy Seroussi, an investment partner at Arsenal. “We look forward to collaborating with H.I.G. and the USALCO management team.”

New York-headquartered Arsenal invests in middle-market specialty industrial and healthcare companies that have $100 million to $500 million of enterprise value. Since its founding in 2000, Arsenal has raised total capital of $7 billion, closed more than 200 platform and add-on acquisitions, and exited more than 30 portfolio companies.

© 2021 Private Equity Professional | November 30, 2021

Crossplane Capital had invested in Domino Equipment Company, a distributor and servicer of petroleum equipment, car wash equipment, and compressed natural gas and electric vehicle charging stations.

Domino’s petroleum equipment includes fuel dispensers; card readers and point of sale systems; in-tank monitoring systems; nozzles, swivels, and hoses; underground and above ground storage tanks; and perimeter and canopy lighting.

In addition to its distribution and servicing activities, Domino also operates 13 Oklahoma-based car washes under the Xtreme Auto Wash brand. Domino was founded in 1989 by CEO Barry Brodersen and is headquartered in Oklahoma City, Oklahoma.

“Over the past 32 years, Barry has done a phenomenal job growing Domino into what we believe is a uniquely strategic business with a number of actionable growth opportunities,” said Mike Sullivan, a managing director at Crossplane. “We look forward to expanding Domino’s presence both within the company’s core Oklahoma footprint as well as adjacent geographies.”

“With its strong position in both the fueling system and car wash equipment installation and service markets in Oklahoma as well as its Xtreme Auto Wash car wash business, Domino aligns well with our focus on investing alongside strategically sound, family-owned, industrial services-based businesses,” said Ben Eakes, a partner at Crossplane. “We are thrilled to be partnering with Barry Brodersen and the Domino team to continue the company’s impressive upward trajectory over the next several years.”

Twin Brook was the administrative agent on debt financing to support Crossplane’s investment in Domino. Chicago-based Twin Brook focuses on loans to private equity-owned companies with EBITDA between $3 million and $50 million, with an emphasis on companies with $25 million of EBITDA and below. The firm targets senior financing opportunities up to $200 million, with hold sizes across the platform ranging from $25 million up to $150 million. Twin Brook’s products include opportunistic investments in second lien, mezzanine, and equity co-investments.

Crossplane invests control equity in companies that have up to $15 million of EBITDA that are either family-owned and seeking a partner or involved in a complex situation. Sectors of interest include niche manufacturing, value-added distribution and industrial business services companies. The firm held a hard-cap close of its inaugural fund, Crossplane Capital Fund LP, with $275 million of capital in December 2020. Crossplane was founded in October 2018 and is headquartered in Dallas.

© 2021 Private Equity Professional | November 30, 2021