Solvay adds to U.S. energy business with $1.3 bln Chemlogics buy

Reuters

* Adds to presence in $8 bln U.S. oil and gas chemicals

* Pays multiple of 10.7 times core profit vs sector's

* Plans to issue $1.3 bln euros of hybrid bonds

* Solvay shares rise 1.6 percent

By Philip Blenkinsop

BRUSSELS, Oct 7 (Reuters) - Belgian chemicals and plasticsmaker Solvay has agreed to buy privately heldChemlogics for $1.345 billion, bringing its share of the $8billion-a-year U.S. market for chemicals used by the oil and gasindustry to 10 percent.

The market is forecast to grow 6 percent a year to 2017,driven by fracking or horizontal drilling for shale oil andshale gas as well as deepwater drilling, Solvay said.

Traditionally a maker of low-margin PVC and soda ash, Solvaybought France's Rhodia in 2011 for its chemicals operations andhas been moving away from PVC since, investing in higher-marginspecialty polymers for energy, water, healthcare and cosmetics.

The company said it will finance the latest deal with cash,but also said it plans to issue 1 billion euros ($1.36 billion)of hybrid bonds to refinance debt maturing in 2014.

It is paying a multiple of 10.7 times core profit (EBITDA)and 8.7 times net of a tax benefit compared to a U.S. specialtychemicals sector average enterprise value to EBITDA multiple of9.5, according to Thomson Reuters StarMine data.

"It's not cheap," KBC analyst Wim Hoste said.

"It means certainly that Chemlogics and Solvay must be ableto keep up the growth, but it is a market with a lot of growthpotential," he said.

Solvay said in a statement on Monday that the acquisitionwould accelerate its transformation into a group with highergrowth and boost its exposure to a buoyant U.S. energy sector.

Chemlogics, with 277 employees and $500 million of sales inthe last 12 months, has increased its core profit by adouble-digit percentage per year over the past five years.

Solvay said Chemlogics - specialising in friction reducers,non-emulsifiers and extraction technologies - fits into itsNovecare business, which supplies cosmetics, detergents,agrochemicals and oil industries, and has technology forsurfactants, natural polymers and eco-friendly solvents.

Solvay shares rose 1.6 percent to 110.5 euros, putting themamong the strongest performers in the FTSEurofirst 300 index of leading European stocks and one of only two risersin the STOXX 600 European chemical index.

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