Exclusive: 3i to sell Azelis chemicals firm: sources

By Simon Meads

LONDON (Reuters) – British private equity firm 3i Group (III.L: Quote, Profile, Research) has kicked off the sale of Azelis, a Belgium headquartered chemicals distributor with 1 billion euros ($1.4 billion) in sales, people familiar with the situation said.

London-listed 3i has hired Bank of America Merrill Lynch (BAC.N: Quote, Profile, Research) to sell the company, which it acquired in 2007 in a 315 million euro deal, two people said on Friday.

The firm hopes to run a tightly-controlled auction process, focusing on potential trade buyers, one of the people said.

3i declined to comment.

Azelis operates in 26 markets across Europe and has offices in Shanghai and Mumbai, serving more than 50,000 customers with chemicals for paints and polymers for plastics manufacture.

The company handles the sales and development of the Mirasil cosmetics line for Bluestar Silicones and distributes flavorings for the food and beverage industry, including a recently launched vegetarian bacon flavoring.

3i, which values its businesses conservatively and often sells at a significant premium to asset value, held the equity in the business at 193 million pounds ($310 million) at the end of September. Since then it has bolted on three smaller chemicals distributors, further boosting sales.

The business had about 300 million euros in debt in 2007, according to Thomson Reuters LPC data, which together with the equity could give Azelis an enterprise value in excess of 500 million euros.

The sector has proved a big draw for private equity.

Germany’s Brenntag (BNRGn.DE: Quote, Profile, Research), which says it is the world’s biggest chemical distributor, was floated by BC Partners (BCPRT.UL: Quote, Profile, Research) a year ago.

Based on Brenntag data for end-2008, the world’s no. 2 and 3 distributors are Univar and Ashland – also private equity-backed, with Azelis no. 3 in Europe.

Last year, Clayton, Dubilier & Rice took a big stake in Univar NV (UNIV.UL: Quote, Profile, Research) from CVC (CVC.UL: Quote, Profile, Research), while TPG (TPG.UL: Quote, Profile, Research) bought Ashland Inc’s distribution unit. Rival Dutch distributor IMCD was sold to Bain Capital for some 650 million euros in December.

The business could make a merger target for IMCD itself, as well as Cinven (CINV.UL: Quote, Profile, Research), which was narrowly pipped in that process, one of the people said.

Azelis had sales of 987 million euros in 2009 and earnings before interest, tax, depreciation and amortization of 44 million euros, according to the company’s website.

(Additional reporting by Isabell Witt; editing by Steve Slater and Will Waterman)

($1=.7062 Euro)

($1=.6217 Pound)

Exclusive: 3i to sell Azelis chemicals firm: sources