As predicted, Asia is shopping abroad. In the latest example, Thailand’s Indorama Ventures has agreed to buy Old World Industries’ Texas-based ethylene business for $795 million.
Indorama Ventures is a global leading producer in what it bills as the “polyester value chain”, which really means it makes polyester on an industrial level. And that goes into more than just clothing — it is also used in the packaging, healthcare and automobile sectors.
While this may not sound sexy, the company employs 8,920 people worldwide and boasted consolidated revenues for the past 12 months of $5.5 billion, a tidy sum for a Thai company.
Old World, which is headquartered in Illinois, is a leading North American manufacturer of ethylene oxide and ethylene glycol. It is among the biggest privately held companies competing in the automotive aftermarket.
The deal gives the Thai company access to competitively priced raw materials. And here is where the story gets slightly technical — but bear with us, as you need to know this to get the strategic rationale. Old World is the biggest single ethylene oxide and ethylene glycol plant in the US, with the capacity to make 435,000 tonnes of crude ethylene oxide a year. Monoethylene glycol is one of the key components, together with purified terephthalic acid (PTA), in the manufacture of polyethylene terephthalate (PET) and polyester fibres and yarns, which are both downstream products of Indorama.
“Old World is located in Clear Lake, Texas, near Houston, which is the hub for petrochemical activity, where the entire shale to ethylene feedstock is available through an extensive network of pipelines,” explained Aloke Lohia, group CEO of Indorama, noting that by purchasing this company Indorama will be able to get good pricing on these essential ingredients to production. And therefore Indorama will be able to price its own products more competitively.
The deal is financed in part by new credit facilities granted by Siam Commercial Bank and cash available from earlier fundraising activities. Evercore Partners and HSBC were financial advisers to Indorama, while Allen & Overy acted as legal advisers. William Blair & Company and Bracewell & Giuliani acted as financial and legal advisers respectively to Old World Industries. The acquisition is expected to be completed in the first quarter subject to customary approvals.
The deal was Hong Kong-based Evercore Partners first transaction in Thailand. Phil Kassin in New York and Stephen CuUnjieng in Hong Kong led the team for Evercore.
In addition to expanding in the US, Indorama recently announced that it intends to build an integrated PTA, PET and polyester staple fibre plant in India after its acquisition in January of US-based FiberVisions, the world market leader in polypropylene fibres.
Meanwhile, Old World will hang on to its consumer products division (including a brand called Peak, which makes antifreeze, motor oil and other such automotive products), and will enter into a long-term supply contract for chemicals for some of those items. Peak products are marketed in more than 30 countries around the world using Nascar driver Danica Patrick as their long-term spokesperson.
“The announcement is a strategic move that will allow Old World to focus all of its time and resources on expanding the Peak family of products in the automotive and heavy duty marketplaces worldwide,” said Tom Hurvis, Old World’s chairman and CEO.
