Specialty chemicals and advanced materials company Rockwood Holdings, Inc. (ROC) has agreed to divest its advanced ceramics business CeramTec to private equity firm Cinven for €1.49 billion (roughly $2 billion).
Germany-based CeramTec makes high performance advanced ceramics materials and products for medical, electronics, industrial and automotive markets with 18 facilities globally. The entity has strong foothold in a number of niche markets such as medical products, cutting tools and mechanical applications.
The transaction, which is subject to appropriate regulatory clearances, is expected to consummate during third-quarter 2013. Cinven has secured fully committed financing for the deal.
The move is in line with Rockwood’s goal to become a more focused specialty chemical company. The company plans to use the net proceeds from the sale to cut debt, return capital to shareholders and re-invest in core businesses.
Rockwood, in April, posted its first-quarter 2013 results. Its profit, as reported, slid 75% year over year to $18.9 million or 24 cents a share. The bottom line was hurt by weak results from Titanium Dioxide (TiO2) Pigments and Performance Additives units. Adjusted earnings of 68 cents per share beat the Zacks Consensus Estimate by a penny.
Revenues rose 2.7% year over year to $934.6 million in the quarter, surpassing the Zacks Consensus Estimate of $901 million. Revenues from the Advanced Ceramics division fell 1.2% to roughly $143 million on lower volumes in most applications.
Rockwood expects all of its businesses, except TiO2 Pigments, to improve year over year in the remainder of 2013. The TiO2 business is expected to continue its weak performance in the second quarter before it turns profitable in the second half. The Performance Additives segment is expected to gain momentum on improving U.S. remodeling and construction activities.
Rockwood is focusing on optimizing free cash flows and implementing appropriate capital allocation strategies through dividends and share repurchases and reinvestment in key businesses in 2013. Some of its growth projects include the expansion of the Chilean project for increasing lithium carbonate capacity.
Rockwood currently holds a Zacks Rank #3 (Hold).
Other companies in the specialty chemical space that are worth considering include American Vanguard Corp. (AVD), Ferro Corp. (FOE) and OM Group Inc. (OMG). While American Vanguard and OM Group retains a Zacks Rank #1 (Strong Buy), Ferro holds a Zacks Rank #2 (Buy).
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