Avient at ‘inflection point' with acquisition of DSM materials unit

AVON LAKE, Ohio—Avient Corp. is shaking up its plastics business portfolio, announcing plans to sell its industry-leading resin distribution business, while also making another acquisition in the composites sector.

The company announced April 19 that it plans to buy Royal DSM's protective materials business—including Dyneema-brand fiber—for nearly $1.5 billion. In a related move, Avient also plans to explore a sale of its distribution business.

In an April 20 conference call with analysts, Chairman, President and CEO Robert Patterson described the distribution unit as "a cashflow-generating machine that's been used to fund our specialty growth." That unit posted sales of $1.63 billion in 2021, ranking second among Avon Lake-based Avient's three operating units.

In the first quarter of 2022, the distribution unit rang up sales of almost $433 million, up more than 19 percent vs. the same quarter in 2021 and representing about one-third of Avient's total sales. The unit distributes resin and compounds for 21 suppliers, including Dow Inc., BASF SE and LyondellBasell Industries.

"With the addition of Dyneema, we're at an inflection point and are going to explore ways to look for more shareholder value and become a pure-play specialty company," Patterson said.

The deals will continue Avient's focus on building an advanced composites platform, a strategy the company has been pursuing for 10 years. The transaction includes all of DSM's Protective Materials activities, the most important of which is Dyneema, an ultra-high-molecular-weight polyethylene and the strongest man-made fiber in the world.

Estimated sales and earnings before interest, taxes, depreciation and amortization (EBITDA) for the Dyneema business in 2022 are approximately $415 million and $130 million, respectively. The business includes six production facilities, four R&D centers and approximately 1,000 employees.

With the addition of Dyneema, Avient's composites platform will represent more than 50 percent of the company's Specialty Engineered Materials segment sales. The companies expect that deal to close in the second quarter of 2022.

Avient Chief Financial Officer Jamie Beggs added on the call that proceeds from the distribution sale could be used to pay down debt. When that sale is made, Avient will be generating all of its adjusted EBITDA from specialties businesses. That amount was less than 10 percent in 2005.

Previous composites acquisitions made by Avient include its deals for Glasforms Inc. of Birmingham, Ala., in 2012, and Polystrand Inc. of Englewood, Colo., in 2016. Patterson said Dyneema's demand growth is coming from military applications, sustainable uses and other end markets.

"This is not a cost-cutting play, it's a capabilities play," he said. "We're at the next stage of our transformation journey and our momentum is stronger than ever."

DSM, a global materials firm based in Heerlen, the Netherlands, in September 2021 announced plans to review its operations and possibly sell several businesses, including nylon, PET, polybutylene terephthalate, copolyester and other materials. Officials said at that time that the business will likely not be able to "maximize their full potential to drive the important industrial shift to a bio-based and circular economy."

The acquisition is Avient's largest since the firm spent $1.4 billion to acquire the masterbatch concentrates business of Clariant AG in 2020.

The company was called PolyOne Corp. prior to its acquisition of Clariant.

Avient predecessor M.A. Hanna, which became PolyOne following a merger with Geon Co. in 2000, formed the distribution unit beginning in the mid-1980s by acquiring and combining regional distributors Plastic Distribution Corp. of Ayer, Mass.; Bruck Plastics Co. of Romeoville, Ill.; and Fiberchem Inc. of Seattle into a single business.

As PolyOne, the company took a big step to change its focus in 2019 when it sold its Performance Products & Solutions unit to investment firm SK Capital for $775 million. That business now operates as Geon Performance Solutions in Westlake, Ohio.

Resin distribution has been a hot M&A sector, especially with private equity-owned companies playing a larger role in the market. In the past month, resin distributors owned by investment firm One Rock Capital Partners LLC have made several deals.

One Rock, based in Los Angeles and New York, could be a suitor for the Avient distribution unit. The firm has made two major distribution acquisitions since 2019, buying Nexeo Plastics of The Woodlands, Texas, and Distrupol of Surrey, England.

Market veteran Phil Karig said that Avient's purchase of DSM's protective materials unit "is just the latest in a long line of raw materials companies looking to move into higher value-added and presumably more sustainably profitable market segments."

In an email to Plastics News, Karig, managing director of Mathelin Bay Associates in St. Louis, added that by selling its resin distribution unit, Avient "is essentially killing two birds with one stone — helping to finance the purchase from DSM while, at the same time, subtracting the lower-value added distribution business from its overall portfolio."

Wall Street reaction to Avient's announcements was positive, sending the firm's per-share stock price up almost 10 percent to $52.50 in early trading April 20.

Avient's total first-quarter sales were up 11 percent to almost $1.3 billion, with profit up about 6 percent to $84.5 million. The firm's Color, Additives & Inks unit saw first-quarter sales growth of almost 7 percent, while its Specialty Engineered Materials unit saw sales climb 13 percent.

Currently, four Avient plants in China "are essentially shut down" because of COVID-19 restraints, Patterson said. "The orders are there, and we can eventually catch up, but the timing of the reopening is a question mark," he added.

Avient is one of the world's largest concentrate makers and one of North America's largest compounders and resin distributors. The firm employs more than 8,000 worldwide and posted total sales of $4.8 billion in full-year 2021.