Global specialty chemicals company Cabot Corp (NYSE:CBT) said Thursday it has struck a deal with Doughty Hanson & Co. and Euroland Investments B.V. to purchase activated carbon product maker Norit, for $1.1 billion, in an effort to focus on higher margin and less cyclical business.
"Norit’s leading market position, unique technology and strong financial performance is an excellent fit with Cabot’s portfolio," said Cabot’s president and CEO, Patrick Prevost.
"This acquisition supports the ongoing transformation of our portfolio to a higher margin, less cyclical, specialty chemicals focused company. The acquisition of Norit is a natural extension of our core R&D and applications development competencies."
Activated carbon is a highly porous chemical used to absorb impurities from the air, water, and other liquids and gases, as well as from food and beverages and pharmaceuticals.
Netherlands-based Norit currently operates 10 manufacturing facilities throughout the Americas and Europe. For the twelve months that ended December 31, 2011, the company generated sales of $360 million, and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $92 million.
The business has grown 12 per cent annually since 2007.
"Norit’s differentiated products for high-end applications drive substantially higher margins relative to competition," said Cabot’s CFO, Eduardo Cordeiro.
"Norit’s fundamental business performance generates EBITDA margins in excess of 25 percent and we expect annual revenue growth in the range of 10 percent to 12 percent."
"We remain confident in our adjusted EPS target of $4.50 in 2014 from our base business, and the Norit acquisition will be incremental to that target."
Massachusetts-based Cabot said that it anticipates earnings per share accretion to be in the range of 20 to 25 cents in fiscal 2013, and 30 to 40 cents per share in 2014, excluding one-time costs.
The transaction is expected to yield roughly $50 million of cash tax synergies related to net operating losses, the parties said.
Cabot wants to finance the acquisition with a combination of roughly $200 million of cash and $300 million of borrowings under its existing revolver.
The deal is expected to close within fiscal 2012. Cabot plans to issue around $600 million of long-term debt prior to the transaction's close.
Cabot has operations in the United States and around 20 other countries. Its major products are carbon black, inkjet colorants, aerogel and cesium formate drilling fluids.
Norit produces over 150 different types of activated carbon products. The company also offers activated carbon reactivation, carbon change out services, and both granular and powdered carbon systems and equipment.
Cabot shares closed Wednesday at $37.97.