Kraton Performance gets committed financing for $1.37 billion acquisition of Arizona Chemical

By Lisa Kerner and Paul A. Harris

Charlotte, N.C., Sept. 28 – Kraton Performance Polymers, Inc. will fund its proposed $1.37 billion cash acquisition of all the capital stock of privately held Arizona Chemical Holdings Corp. through committed debt facilities from Credit Suisse Securities (USA) LLC, Nomura Securities International, Inc. and Deutsche Bank Securities, Inc.

AZC Holding Company, LLC, which is principally owned by investment funds managed by American Securities LLC, is the seller, according to a news release.

The $1.37 billion base purchase price is subject to adjustment for cash and debt at closing, as well as an adjustment for working capital and other items.

“Following the acquisition, Kraton’s long-term debt is expected to be approximately $1.78 billion including approximately $1.35 billion of covenant-lite term loans, with the balance comprised of senior unsecured notes,” said executive vice president and chief financial officer Stephen E. Tremblay.

“In addition, we will retain adequate liquidity through a $250 million asset-based revolving credit facility which we expect to be largely undrawn.”

Kraton’s capital structure at closing will also include $425 million of senior unsecured notes, according to presentation materials.

The expected strong free cash flow profile of both companies will allow the combined company to rapidly de-lever from net leverage at closing of about 4.6 times to roughly three times by year-end 2017, according to Tremblay.

Kraton expects pro forma free cash flow of more than $450 million over the first three years.

The acquisition is currently expected to close in late 2015 or early 2016.

Lazard, J.P. Morgan Securities LLC and Nomura Securities International, Inc. are serving as financial advisors to Kraton.

Kraton is a Houston-based producer of engineered polymers and styrenic block copolymers.

Arizona Chemical is a global producer of high-value performance products and specialty chemicals derived from non-hydrocarbon, renewable raw materials. The company has offices in Jacksonville, Fla., and Almere, the Netherlands.

© 2015 Prospect News.
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