HIG Capital to ‘accelerate investments' in Avient distribution unit

AVON LAKE, Ohio—Private equity firm HIG Capital has plans to grow Avient Corp.'s distribution unit, which it is acquiring for $950 million in cash.

In a statement to Plastics News, Robert Jang, managing director with Miami-based HIG. said that the firm "is thrilled to be investing in the preeminent distributor of thermoplastic and thermoset resins and additives."

"Looking ahead, we plan to accelerate investments in commercial sales, technical support, operations and digital solutions to drive further value for customers and supplier partners," he added.

The deal was announced Aug. 12, about four months after Avon Lake-based Avient had announced plans to sell the unit, which ranks as one of North America's largest resin distributors. The business posted 2021 sales of $1.63 billion. It distributes resin and compounds for 21 suppliers, including Dow Inc., BASF SE 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. 12.

"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. After-tax proceeds of roughly $750 million from the sale will be used to pay down near-term maturing debt.

Avient Distribution President Cathy Dodd said Aug. 12 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."

HIG has made numerous plastics investments over the years. 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.

Stock analyst Frank Mitsch of Fermium Research in New York praised the Avient-HIG deal in a research note, saying: "Isn't it nice when a company pursues a portfolio transaction and not only closes a deal but also delivers attractive deal metrics?"

"With this becoming more and more rare of late, we commend Avient for the announcement," he added. "Combined with its recent acquisition of Dyneema, … Avient is well on its way to its specialty transformation into 'a pure play specialty formulator of sustainable solutions.'"

Avient's distribution business has benefited from higher resin prices and strong demand. 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, since 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's pending purchase of Royal DSM's protective materials business—including Dyneema-brand fiber—for nearly $1.5 billion.

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 PN that all three firms had been in contact with Avient before the HIG deal was announced.

Market watchers told PN after the deal was announced that Avient may have sold the unit to HIG because, unlike a competitor, HIG doesn't have any existing relationships with material suppliers that could be complicated by combining two similar businesses.

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.

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