H.I.G. and Arsenal Merge Specialty Chemical Companies

H.I.G. and Arsenal Merge Specialty Chemical Companies

H.I.G. invested in USALCO in June 2020 and Arsenal acquired GEO Specialty Chemicals in September 2019

The combined specialty chemical businesses will manufacture both aluminum-based and iron-based coagulants that are used in water and wastewater treatment processes

SOURCE: Getty Images

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

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