Chemical company KMG Chemicals Inc. (NYSE: KMG) has reached a deal with Arsenal Capital Partners to acquire Flowchem, a manufacturer of pipeline performance chemicals. The deal is valued at $495 million in cash, including working capital of approximately $17 million.
Flowchem, founded in 2001, provides drag-reducing agents (DRA) and equipment used to reduction friction near pipeline walls and within the turbulent fluid flowing through pipeline network. The Waller, Texas-based target manufactures chemical products that help optimize pipeline flow and reduce pipeline operating costs. One of the largest DRA providers globally, Flowchem serves more than 50 pipeline operators, as well as midstream service providers and distributors.
KMG provides electronic and wood-treating chemical products for a variety of markets. Based in Fort-Worth Texas, the buyer expects to complete its acquisition of Flowchem in mid-June 2017. The purchase of Flowchem strengthens KMG’s capabilities in the pipeline performance vertical and builds scale, according to KMG CEO Chris Fraser.
Headquartered in New York City, Arsenal is a lower middle market private equity firm focused on industrial and healthcare companies with up to $250 million in enterprise value. The firm acquired Flowchem in December 2013 for an undisclosed amount. Arsenal has also made similar deals within the chemical sector. In 2015, Arsenal formed Polymer Solutions Group through the acquisition of Peach State Labs Inc. The PE firm later backed several add-on companies, including: Alkon Solutions Ltd, a maker of liquid coatings and powder for the rubber industry; Flow Polymers LLC, a manufacturer of plastic and rubber additives; and Sasco Chemical Group, a producer of anti-tack agents for the rubber industry. KeyBanc Capital Markets acted as financial adviser to Arsenal and Flowchem.
Recent deals for specialty chemical companies include: the Jordan Co. LP’s purchase of DuBois Chemicals Inc., a chemical producer for the manufacturing industry, from Aurora Capital Group; Maroon Group LLC’s acquisition of Lincoln Fine Ingredients; Platte River Equity’s purchase of Tiger-Sul Products LLC, a maker of crop performance products for the agricultural and industrial sector; Hastings Equity Partners’ acquisition of Impact Chemical Technologies, a chemical maker to the oil and gas industries; and PPG Industries Inc.’s newly proposed bid to acquire European coatings producer Akzo Nobel NV for $28.8 billion.