Ingevity Corporation NGVT has agreed to acquire the Capa caprolactone division of Perstorp Holding AB in a cash transaction valued at roughly $675 million. The buyout is subject to regulatory approvals and other customary closing conditions. Ingevity expects the deal to close in the first quarter of 2019.
Capa is an international market leader in the manufacture and commercialization of caprolactone and high-value downstream derivatives, which include caprolactone thermoplastics, caprolactone polyols, caprolactone lactides and hexanediol. The division’s products are crucial components in coatings, adhesives, elastomers, bioplastics and resins. It operates a manufacturing facility in Warrington, England and employs around 90 people.
Moreover, Capa expects revenues of around €150 million (roughly $175 million) and EBITDA of roughly €50 million (nearly $60 million) for fiscal-year 2018. The acquisition is likely to be accretive to Ingevity’s earnings immediately in the first full year. The company will incorporate the business in the Performance Chemicals division. It will report revenues as Engineered Polymers.
Per Ingevity, the Capa division has a strong and market-leading business that focuses on high-growth end-use applications. The move complements the company’s business model and capabilities. Moreover, Capa’s top-tier financial performance and profile are expected to drive value creation and benefit shareholders.
Ingevity has outperformed the industry in the past year. The company’s shares have returned 21.1%, against 7.3% decline of the industry.
In October, the company raised the mid-point and narrowed the range for 2018 guidance for adjusted EBITDA to $306-$314 million from $302-$314 million. However, Ingevity reaffirmed sales guidance of $1.10-$1.13 billion for the year.
The company is likely to gain from its strategy to pursue value-creating acquisitions. Earlier this year, the company closed the acquisition of Georgia-Pacific’s pine chemicals business for $310 million. The buyout is expected to create net synergies of roughly $11 million through manufacturing optimization, lower logistics costs and leveraged procurement costs. Also, continued U.S. drilling activity, shift to high margin products and favorable TOFA pricing is likely to boost margins.
Ingevity Corporation Price and Consensus
Ingevity Corporation Price and Consensus | Ingevity Corporation Quote
Zacks Rank & Other Stocks to Consider
Ingevity currently carries a Zacks Rank #2 (Buy).
A few other top-ranked stocks in the basic materials space are CF Industries Holdings, Inc. CF and The Mosaic Company MOS, flaunting a Zacks Rank #1 (Strong Buy) along with BHP Billiton PLC BBL, carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
CF Industries has an expected long-term earnings growth rate of 6%. The company’s shares have gained 1.8% in the past year.
Mosaic has an expected long-term earnings growth rate of 7%. The company’s shares have surged 33.8% in the past year.
BHP Billiton has an expected long-term earnings growth rate of 5.3%. Its shares have moved up 5.4% in a year’s time.
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