Describing Norit as a noncyclical, high-growth and high-margin business, Cabot said the company was an excellent fit with its portfolio, would offer earnings per share accretion by the 2013 financial year and also further its broader strategic goals.
"This acquisition supports the ongoing transformation of our portfolio to a higher margin, less cyclical, specialty chemicals focused company," Cabot president and CEO Patrick Prevost said. "The acquisition of Norit is a natural extension of our core R&D and applications development competencies."
London-based Doughty Hanson bought Norit from Dutch private equity firm Gilde Buy Out Partners for €311 million ($392 million) in 2007. A source close to the situation said Thursday that the firm made 2.5 times its money on the investment and an internal rate of return of 23%. The private equity firm said the Activated Carbon business had performed strongly, recording an Ebitda compound annual growth rate of almost 30% under Doughty Hanson's ownership.
According to Cabot CFO Eduardo Cordeiro, Norit generates Ebitda margins in excess of 25% and the buyer expects annual revenue growth in the range of 10% to 12%.
Norit, of Zenderen, Netherlands, and Marshall, Texas, is one of the world's largest producers of activated carbons used in a range of environmental, health, safety and industrial applications. Its technologies are used to remove pollutants, contaminants and other impurities from water, air and other gases and liquids as well as from food and pharmaceuticals.
Doughty Hanson sold Norit's Clean Process Technologies unit to U.S. water technology group Pentair Inc. in May 2011 for €503 million and has since been working on the sale of the remaining activated carbon business.
In March, Norit announced early plans for an initial public offering on the New York Stock Exchange and appointed Goldman Sachs Group Inc. and Deutsche Bank AG as bookrunners. But Doughty Hanson was running a dual-track process and simultaneously put purification technologies specialist Norit up for auction.
Cabot said it expected estimated earnings per share accretion to be in the range of 20 cents to 25 cents in fiscal year 2013 and 30 cents to 40 cents in fiscal year 2014, excluding one-time costs. It said Norit's growth would benefit from Cabot's process engineering capability, geographic footprint and material science expertise. Additionally, it said the transaction was expected to yield roughly $50 million of cash tax synergies related to net operating losses.
Cabot expects to finance the acquisition with a combination of about $200 million of cash and $300 million of borrowings under its existing revolver. In addition, the company plans to issue about $600 million of long-term debt prior to closing. The deal is expected to close within calendar year 2012, subject to Dutch works council consultation and regulatory approval in the U.S. and Germany.
J.P. Morgan is Cabot's financial adviser for the transaction. Dan Neff of Wachtell, Lipton, Rosen & Katz is Cabot's legal adviser, with De Brauw Blackstone Westbroek NV and Robin Ogle of Slaughter & May serving as Dutch and English counsel, respectively.
Doughty Hanson's Mark Corbidge turned to Allan Murray-Jones and Paul Doris of Skadden, Arps, Slate, Meagher & Flom LLP for legal counsel.
NBGI Private Equity appointed food and drinks industry veteran Tim Kelly as a senior adviser. For other updates launch today's Movers & shakers slideshow.
Blackstone Real Estate and DDR divide 46 shopping centers in a $1.46 billion deal. More video