Private equity buyer HIG outbids rivals for Avient's distribution unit

AVIN LAKE, Ohio—One of the largest resin distributors in North America has a new owner: Avient Corp. announced Aug. 12 that it is selling its distribution unit to an affiliate of private equity firm HIG Capital for $950 million in cash.

Avon Lake, Ohio-based Avient had announced plans to sell the unit in April. The unit posted 2021 sales of $1.63 billion and distributes resin and compounds for 21 suppliers, including Dow Inc., BASF S.E. and LyondellBasell Industries.

"As expected, there were multiple buyers interested in acquiring the distribution business, and it was a competitive process," Avient Chairman, President and CEO Robert Patterson said Aug. 11.

"Ultimately, we selected HIG based on the strength of their proposal, which values the business at approximately 10 times (last 12 months) EBITDA and includes no financing contingencies," he added. "We are also confident that HIG will make an excellent home for the distribution business and a good partner for Avient as both a supplier and a customer."

Avient is one of the world's largest concentrate makers and one of North America's largest compounders.

An HIG spokesman said the Miami-based firm would comment on the deal in the near future. HIG has made numerous plastics investments over the years. In May, the firm sold materials firm Valtris Specialty Chemicals to SK Capital for an undisclosed price. Independence, Ohio-based Valtris makes polymer additives and specialty chemicals.

In early 2021, HIG acquired Action Point Inc. and Signature Flexible Packaging Inc. and combined them into a single company making flexible food and consumer packaging. Products made by Action and Signature include rollstock, pouches and bags.

Avient's distribution business has been benefiting from higher resin prices and strong demand from North American plastics processors. In the first half of 2022, the unit posted sales of $876.1 million—up 14 percent vs. the first half of 2021—and operating profit of $51.3 million, up 7.5 percent in the same comparison.

The sale did not surprise market watchers. The distribution unit no longer seemed to fit the specialty strategy that Avient, formerly PolyOne, had been following for several years. This was evident by Avient announcing on the same day its purchase of Royal DSM's protective materials business—including Dyneema-brand fiber—for nearly $1.5 billion.

Avient officials said Aug. 12 that after-tax proceeds of approximately $750 million from the sale will be used to pay down near-term maturing debt.

"The sale of the distribution business and acquisition of DSM Protective Materials represent the next steps in our specialty transformation that began over a decade ago," Patterson said. "We are excited about our future as a pure play specialty formulator of sustainable solutions."

In an Aug. 12 email to Plastics News, Avient Distribution President Cathy Dodd said that "together with my leadership team, I believe HIG will provide us with a springboard to build on our growth, ultimately benefiting our customers and supplier partners."

Patterson on an April 20 conference call with analysts had described the distribution unit as "a cash flow-generating machine that's been used to fund our specialty growth."

"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," he said.

On a second-quarter earnings call, Patterson said that Avient "had received multiple first-round bids, and based on preliminary valuations, we invited a smaller set of buyers to proceed to a second round, which is underway now."

Avient predecessor M.A. Hanna Co., 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.

Prior to the HIG deal being announced, market watchers said the most likely buyers of the Avient Distribution unit were competitors Nexeo Plastics, Vinmar International and Ravago Group. One industry source with knowledge of the matter told Plastics News that all three firms had been in contact with Avient before the HIG deal was announced.

Nexeo is owned by private equity firm One Rock Capital Partners L.L.C. One Rock, based in Los Angeles and New York, has made two major distribution acquisitions since 2019, buying Nexeo of The Woodlands, Texas, and Distrupol of Surrey, England.

One factor in the Avient sale was the pending sale of most of DuPont Co.'s materials business to Celanese Corp. Market watchers said DuPont is the largest supplier to Avient's distribution unit, accounting for an estimated 25-30 percent of total sales.

The outcome of the DuPont piece of Avient's business potentially could affect the value of the unit. A Celanese spokesman said the firm "is still working through integration … targeting the last part of 2022 and are still sorting details around distributors and other pieces of the deal."

In an email to Plastics News in early August, Avient's Dodd said that "from our perspective, the relationship between Avient Distribution and DuPont's plastics segment is strong and has only grown stronger over the last several years…We look forward to continuing this partnership as DuPont's plastics group transitions to new ownership under Celanese."

Industry veteran Phil Karig said in early August that "any number of distributors would be a good fit for the Avient assets," but that financial buyers also "shouldn't be counted out," according to Karig. "They still have plenty of capital available to them."

Avient employs more than 8,000 worldwide and posted total sales of $4.8 billion in full-year 2021.