Chemical maker Cabot Corp will buy Netherlands-based activated carbon manufacturer Norit NV from its private-equity owners for $1.1 billion to focus on higher-margin specialty chemicals.
Leading chemical companies such as Dow Chemical Co, German conglomerate BASF SE and Ashland Inc are focusing on specialty chemicals, demand for which tends to be resilient during economic downturns.
Specialty chemicals are widely used in water purifiers, pharmaceuticals, skin creams, hair gels and cosmetics, while commodity chemicals depend on cyclical machinery makers, car manufacturers and builders.
"This acquisition supports the ongoing transformation of our portfolio to a higher margin, less cyclical, specialty chemicals-focused company," Cabot Chief Executive Patrick Prevost said.
Cabot will buy Norit from affiliates of British private equity fund Doughty Hanson & Co Managers Ltd and Dutch investment firm Euroland Investments BV. Norit was acquired by a group of investors led by Doughty Hanson in 2007.
There is a move towards consolidation among specialty chemical companies, as reflected in Eastman Chemical Co's $3.4 billion offer for Solutia Inc last year.
Norit has 10 plants in the Americas and Europe that make activated carbon, used in purification and filtration processes, food and beverages and pharmaceuticals.
The company, which sold its Clean Process Technologies unit to Pentair Inc for 503 million euros last year, had sales of $360 million and earnings before interest, taxes, depreciation, and amortization of $92 million in 2011.
Reuters reported in April that Norit, which had earlier announced plans for a U.S. initial public offering, was also exploring a sale of itself.
Cabot expects the Norit deal to add 20 cents to 25 cents per share to its earnings, excluding one-time costs, in 2013.
Cabot expects to fund the deal with $200 million in cash and $300 million of borrowings. The company also plans to issue about $600 million of long-term debt.
The transaction is expected to close by the end of the year. It requires approval from U.S. and German regulators and consultation with the Dutch works council, representing employees.
If completed, the Norit deal will be Cabot's largest to date.
J.P. Morgan was Cabot's financial adviser for the deal.
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