Georgia-Pacific LLC announced Tuesday (Aug. 22) that it has reached an agreement to sell its pine chemicals business for $315 million to Ingevity, a publicly-traded chemical manufacturer based in Charleston, S.C., that has more than 25 locations across the globe.
In purchasing the GP’s pine chemicals business, Ingevity will acquire the pine chemicals-related assets at the Crossett plant, saleable inventory, customer lists and the book of business, as well as various patents and trade names associated with acquired product lines, company officials said. The deal is subject to certain regulatory approvals and other customary closing conditions, and Ingevity said it expects to close on the transaction in late 2017.
“Ingevity’s and Georgia-Pacific’s pine chemicals businesses are very complementary,” said Michael Wilson, Ingevity president and CEO. “By combining the companies, we will have a stronger, more competitive pine chemicals business. Our Performance Chemicals segment has recently shown improvement. This acquisition will provide a stronger platform from which we will accelerate profitable growth.”
Georgia-Pacific’s pine chemicals business manufactures and sells pine-based tall oil fatty acids, tall oil rosin, and tall oil rosin esters used in adhesives, cleaners, paints and other coatings, inks, metalworking, mining, oilfield, packaging and rubber processing. Nearly 90% of its revenues come from North America and it manufactures the majority of its products at a Georgia-Pacific site in Crossett.
The sale, however, does not include Georgia Pacific’s 1250-worker consumer productions manufacturing facility in the south Arkansas town that makes tissue, paper and paperboard products for consumer and commercial use. The pine chemicals business has nearly 70 employees, including sales and R&D employees in Atlanta and Decatur, Ga.
“Although the pine chemical business has been profitable and our employees have done a great job running safe, productive assets and meeting our customers’ needs, we believe this sale to an established player in the industry is in the best interest of our customers and stakeholders,” said Rick Urschel, president of Georgia-Pacific Chemicals, which is owned by Koch Industries Inc. of Wichita, Kan.
In addition to these two pine-related segments, Georgia-Pacific’s non-pine chemicals businesses, which serve mainly the wood panels and general industrial markets, are not impacted by the sale. GP will continue to operate ten chemical facilities within the Americas to service customers in those segments.
Separately, Ingevity will also enter into several contract manufacturing arrangements for oilfield and mining products currently produced at other Georgia-Pacific facilities. The two companies will also separately enter into a 20-year, market-based crude tall oil (CTO) supply contract. Ingevity will not acquire the merchant crude tall oil or crude sulfate turpentine business, however, which will be retained and operated by Georgia-Pacific.
Ingevity officials said the acquisition would be accretive to earnings in the first year following closing and that the company expects to derive approximately $11 million in net synergies as a result of the acquisition, most of which would be a result of manufacturing optimization among the combined three chemicals plants and lower transportation and logistics costs.
“The combination of Georgia-Pacific’s pine chemicals business and Ingevity will enhance our ability to provide innovative technologies, high-quality products and superior customer service,” said Wilson. “We are committed to ensuring that customers continue to receive excellent products and services while we jointly work through the integration process.”
The South Carolina chemical company said it will fund the deal with Georgia-Pacific through an amendment and extension of its recent $925 million credit line, which is comprised of a $550 million revolving credit facility and a $375 million term loan.