Sika acquires former BASF chemical company Reuters from Lone Star for USD 6 billion

2021-11-12 10:24:59 By : Mr. David Wang

On February 12, 2021, the logo of the Swiss chemical group Sika was seen on the snow-covered roof of a branch of Berikon, Switzerland. REUTERS/Arnd Wiegmann

Zurich, November 11 (Reuters)-Swiss chemical company Sika has agreed to acquire MBCC Group for 5.5 billion Swiss francs ($6 billion) to enhance its position in the sustainable construction sector, which is worth 700 The largest acquisition in the history of the $100 million construction chemicals field.

Sika said on Thursday that it will acquire the former BASF construction chemicals company MBCC from an affiliate of the private equity firm Lone Star Funds. MBCC's products include long-lasting floor systems and admixtures to extend the service life of concrete.

"Looking forward, we need achieve a sustainable, carbon dioxide-reducing footprint in the construction industry. For this, we can't just change what we have done in the past," CEO Thomas Hasler in Zurich News Said at the press conference.

Sika has seen sustainability as the main driver of the construction market, as construction users seek to extend the life of their offices and factories and use materials with a lower carbon footprint.

In 1143 GMT, its stock price rose 9.8% as analysts welcomed the increase in sales and core earnings (EBITDA) from transactions expected to be completed in the second half of 2022.

According to Vontobel analysts, the transaction "will increase Sika's revenue by approximately 30% and its EBITDA by 25%, making it the undisputed leader in the global construction chemicals market."

MBCC is headquartered in Mannheim, Germany, and is expected to have sales of 2.9 billion Swiss francs in 2021.

MBCC's move represents a step change for Sika. Sika has acquired seven small companies in China, Mexico, the United States, Japan, Brazil and Russia this year.

Sika, whose products are used in waterproofing and other fields, is stepping up its acquisitions. The goal is to increase its share of the construction chemicals market from the current 10% to 12% by 2025.

It expects that by 2025, the market will increase from the current 70 billion francs to about 80 billion francs a year. The government stimulus plan and the trend of more sustainable construction are driving the prosperity of global infrastructure.

Baader Helvea analyst Markus Mayer was surprised that after Sika pointed out several weaknesses in the business at the time, Sika acquired the former BASF business at a price 64% higher than the price Lone Star paid in 2019.

"Reversing MBCC's weaknesses will be one of Sika's most challenging tasks," Meyer said. "In contrast, Sika has a very strong record of integration, so if anyone can turn the business around, it might be Sika."

Sika said the transaction is 11.5 times MBCC's expected EBITDA in 2022. Sika is expected to achieve a synergy of between 160 and 180 million francs, reducing the multiple to 8.5.

It will fund this transaction through a bridge loan, which is expected to "significantly increase" earnings per share starting from the first full year after the transaction is completed.

Bank of America (BAC.N) advised Sika on this transaction.

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