Akzo Nobel NV (Arnhem, the Netherlands) plans to sell its Acordis fibers business to CVC Capital Partners Ltd. (London, UK) for EUR 825 million. Acordis is the world's largest dedicated fibers company. Akzo created it when it merged its fibers operations with those of Courtaulds plc, which it acquired in 1998.
CVC proposes to team with Acordis management to acquire the majority of Acordis while allowing Akzo to retain up to 20% of the business. Akzo says it and the management of Acordis have reviewed the offer and consider it attractive.
Akzo Nobel will sell its EUR 2.3 billion Acordis fiber business to CVC Capital Partners, a European investment firm, for EUR 825 million. Acordis is the world's largest fibers-only producer. Pictured above is its newly revamped 5000 mt/y viscose filament yarn plant in Elsterberg, Germany.
"CVC and Akzo Nobel are of the opinion that it is in the interests of all concerned to expedite the negotiation process and complete the transaction as soon as possible," Akzo says in a written release.
"We back CVC's offer a hundred percent," says Acordis CEO Folkert Blaisse. "We trust that the transaction will be completed fast, effectively and efficiently. For our employees it will put an end to a period of uncertainty, and we are all looking forward to building Acordis into the world leader in fibers."
According to Akzo, CVC plans to invest in the business in order to expand it through a combination of internally-generated growth and acquisitions in its core markets. Acordis would initially operate as a limited liability business, though it could be taken public after about four years. Blaisse would remain CEO.
CVC proposes to pay for Acordis with EUR 675 million in cash and EUR 150 million in an interest-bearing loan payable to Akzo. It will also assume Acordis' existing provisions of approximately EUR 225 million. The transaction represents Acordis' net asset value. Akzo will likely retain a 20% interest in the business in hopes of profiting when the unit eventually goes public.
CVC is an independent European equity provider with more than EUR 4 billion under management. In July, it closed out participation in a EUR 2.9 billion buyout fund for future investments. The company raises capital from investment funds, insurance companies, and individual investors.
CVC describes itself as buying companies "to build businesses in partnership with management." It holds equity positions in more than 200 Continental companies, including Kappa Packaging, Wavin, Bols, William Hill, and Danone's/Gerresheimer. It has taken more than 30 companies public.
Acordis is a huge but underperforming business. In 1998, it had sales of EUR 2.3 billion, employed about 19,000, and ran plants in the United Kingdom, the Netherlands, Germany, Italy, Poland, Spain, Brazil, and the United States.
It is a major producer of such commodities as acetate, acrylic, nylon, polyester and viscose. Specialty products range from geosynthetics to medical fibers for wound care to Tencel, a proprietary cellulose-based fiber that combines synthetic durability with natural breathability and absorbency. Acordis also makes Fortafil carbon and Twaron aramid fibers for composite reinforcement and high-strength cordage.
Although it accounts for 22% of Akzo's total employment, Acordis contributed only EUR 4 million of the company's EUR 311 million in operating income during the first quarter of 1999. Akzo contributes its poor performance to a cyclical fibers market downturn, aggravated by the crisis in Asia. The company's textile fibers business was hit hardest, while industrial fibers did fared better.
Earlier this year, Akzo announced plans to restructure the business to ensure its profitability prior to spinning it off as an independent company. These included major capacity reductions and elimination of 2050 jobs worldwide.
For more information: Akzo Nobel NV, Velperweg 76, PO Box 9300, 6800SB Arnhem, The Netherlands. Phone: +31-26-366-4433. Fax: +31-26-366-3250.
Or: CVC Capital Partners Ltd., Hudson House, 8-10 Tavistock, St., London WC2E 7PP, UK. Phone: +44-171-420-4200. Fax: +44-171- 420-4231.
By Alan S. Brown