Cerberus and Koch Join up to Acquire PQ Performance Chemicals

Cerberus and Koch Join up to Acquire PQ Performance Chemicals

Cerberus Capital Management and Koch Minerals & Trading have partnered to acquire the performance chemicals business of publicly traded PQ Group for approximately $1.1 billion.

PQ’s performance chemicals unit (PQPC) is a producer of sodium, potassium and lithium silicates, and zeolites, also known as aluminosilicates.

Sodium silicate, also known as waterglass, is an inorganic chemical made by combining sand and soda ash at high temperatures. By adjusting the ratio of sand to soda ash, a manufacturer can produce a variety of products with unique functionality in solid, liquid, and powder forms. PQPC is the world’s largest supplier of sodium silicate and is twice as large as its nearest competitor.

The company’s silicate products are used widely in numerous applications for personal and industrial cleaning products, as surface coatings, and in food and beverage products. Common applications include as cleaning and whitening agents in toothpaste, creating a “matted” finish on surface coatings, and removing impurities from beer and edible oils.

In FY2019, PQPC had revenues of $685 million and an adjusted EBITDA of $154 million (a 22.5% margin). Using the FY2019 adjusted EBITDA, the valuation multiple for the sale of PQPC is 7.1x.

Post-closing, the business will continue to operate under the PQ brand and will be led by its president, Al Beninati. PQPC is headquartered near Philadelphia in Malvern, Pennsylvania.

“This milestone is a testament to the strength of our business, talent of our team, and our bright future ahead,” said Mr. Beninati. “We are thrilled to have the support of Cerberus and Koch, who bring a wealth of strategic, financial, and industry expertise. With their partnership, we will be well-positioned to invest in our business, drive product development, and build on our customer relationships as we embark on this new chapter.”

PQ Group (NYSE: PQG) is a provider of specialty catalysts, services, and chemicals that are used in a range of applications. The company operates through three business units: Refining Services provides sulfuric acid recycling to the North American refining industry; Catalysts Technologies serves the packaging and engineering plastics and the refining, petrochemical and emissions control industries; and Performance Chemicals (which is now being divested). PQ Group is headquartered near Philadelphia in Malvern, Pennsylvania.

“We are excited by today’s announcement for the sale of our performance chemicals business at a favorable valuation,” said Belgacem Chariag, the chairman, president and CEO of PQ Group. “In 2019, we laid out a strategic path aimed at driving greater value for our shareholders. The plans we set in motion are now coming to fruition. At year-end 2020, we completed the sale of the performance materials business as a first step. With this agreement to divest the performance chemicals business, we are accelerating the next and most critical step in our strategic transformation.”

Cerberus has approximately $50 billion of assets under management and invests in credit, private equity, and real estate platforms. The firm was founded in 1992 and is headquartered in New York City.

“We are excited to partner with Koch, a strategic leader with invaluable insights, to invest in this industry-leading business,” said Dev Kapadia, a senior managing director at Cerberus. “Together with Koch, we look forward to leveraging our combined operational and industry expertise to drive PQPC’s continued success as an independent company.”

Koch Industries is one of the largest private companies in America with estimated annual revenues of nearly $115 billion. The company has numerous operating subsidiaries that are active in refining and chemicals; forest and consumer products; polymers and fibers; electronics, software and data analytics; and automotive components. Koch subsidiaries include Georgia-Pacific, Molex, Koch Minerals & Trading, Koch Pipeline, Koch Fertilizer, and Guardian Industries.  Koch has more than 120,000 employees and is headquartered in Wichita, Kansas.

Citi and BMO Capital Markets are advising PQ Group on this transaction and Jefferies is advising both Cerberus and Koch.

© 2021 Private Equity Professional | March 2, 2021

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