March 10, 2008

Volume 86, Number 10

p. 14

Acquisition

Arsenal Agrees To Buy DSM Unit

Deal is latest for private equity firm focused on chemicals

Michael McCoy

THE PRIVATE EQUITY company Arsenal Capital Partners has agreed to acquire DSM's special products business for an undisclosed sum. The purchase continues Arsenal's push into the chemical business, where it has already created and sold a firm.

DSM Special Products' main site is in Rotterdam, the Netherlands, where it operates the world's largest plant for oxidizing toluene into benzoic acid, a starting point for the fine chemicals benzaldehyde and benzyl alcohol and the food preservatives sodium and potassium benzoate. Its sales last year were about $150 million, and it turned a slight operating profit, according to DSM.

DSM put the business up for sale last September to focus on life sciences and performance materials. Upon completion of the deal, expected in the second quarter, Arsenal will rename the business Genovique Specialties.

New York City-based Arsenal made a splash in the chemical industry by acquiring Rutherford Chemicals and Reilly Industries, both experts in pyridine chemistry, and combining them to form Vertellus Specialties. Arsenal sold Vertellus to Wind Point Partners in December 2007, reaping what it said was three times its investment in the firm.

Arsenal could be trying to repeat this success. After the Vertellus sale, its main chemical asset has been Velsicol Chemical, a Rosemont, Ill.-based company it acquired in 2005. Velsicol is one of only two U.S. producers of benzoic acid, which it also makes via toluene oxidation.

John Televantos, an Arsenal principal, says his company has no immediate plans to combine Velsicol and Genovique, but he acknowledges their synergies and says Arsenal will revisit its options down the road.

For now, he says, the companies will share technical know-how and best practices. In addition, Arsenal plans to use Velsicol technology to build a dibenzoate ester facility at the Genovique site. According to Televantos—a Ph.D. chemical engineer who has worked for Union Carbide, Arco Chemical, and Hercules—these esters are replacing phthalate plasticizers in the production of flexible polyvinyl chloride.

Despite the credit crunch that has slowed private equity investment in the specialty chemical sector, Televantos says, Arsenal is eyeing more acquisitions. "We are hoping that as other firms move away from this space there will be more opportunity for us," he says.

Chemical & Engineering News

ISSN 0009-2347

Copyright © 2008 American Chemical Society