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December 17, 2010 01:00 AM

Mexichem buying AlphaGary for $300 million

Stephen Downer
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    MEXICO CITY (Dec. 17, 2010)—Mexichem S.A.B. de C.V. is paying $300 million to buy compounder AlphaGary Corp. from Rockwood Holdings Inc.

    Princeton, N.J.-based Rockwood announced the planned acquisition on Dec. 17.

    “The deal will be completed some time in the next few months,” said Timothy McKenna, vice president of investor relations at Rockwood.

    According to Mexichem, which is Latin America's largest manufacturer of PVC pipe, vinyl resins and compounds, AlphaGary has annual sales of $231 million.

    “With this acquisition, we can combine AlphaGary's research and development potential and innovative products with Mexichem's geographic diversification, thus generating important synergies,” Mexichem said in a statement posted on the Mexico City Stock Exchange web site.

    Leominster, Mass.-based AlphaGary develops high technology compounds for niche applications and has multinational clients in such sectors as communications cables, disposable medical devices, crown and closure sealants, automobile components, building materials and consumer products.

    Its range of compounds includes flexible PVC and halogen-free alloys, styrenic-based, vinyl-based and olefinic-based TPEs, nylon alloys, polyurethane blends and cross-linkable polyethylene.

    AlphaGary has four production facilities in the United States, United Kingdom and Canada. Two sites are designed with segregated areas for the manufacture of medical device and beverage sealant compounds.

    “We identified this (AlphaGary) as a non-core business several years ago,” McKenna said, “practically since the time we went public.”

    He declined to say when Rockwood opened negotiations with Mexichem and whether the New Jersey company had spoken to other potential buyers.

    “I can't characterize the negotiations with Mexichem,” he said. “I think it's a good deal for both parties.”

    McKenna said Rockwood will use the proceeds from the sale for debt reduction.

    With its headquarters in Mexico City, Mexichem produces a variety of chemical products at 40-plus plants in Latin America, the United States, United Kingdom, Japan and Taiwan.

    In October it announced net sales of $26.9 billion pesos ($2.157 billion) in the first three quarters of the year, up 19.4 percent compared to the same period in 2009.

    Since launching a $1 billion program of acquisitions three years ago, it has spent an estimated $500 million. The deal with Rockwood, if approved by antitrust authorities, will push that to an estimated $800 million-plus.

    In late November, Mexichem restated its ambitions for the Americas and Europe, saying on the Mexico City Stock Exchange web site that “we are continuing with our expansion plans.”

    At the time, the company said it was undertaking feasibility studies into potential business opportunities in Latin America, the U.S. and Europe that satisfied Mexichem's “growth, efficiency and profit criteria.”

    Seifi Ghasemi, Rockwood chairman and CEO, said the sale of is another step in the firm's strategy of concentrating on high-margin specialty chemicals and advanced materials businesses.

    Rockwood employs 9,500 worldwide and has annual net sales of about $3 billion. The company focuses on global niche segments of the specialty chemicals, pigments and additives and advanced materials markets.

    AlphaGary is the largest division in Rockwood's specialty compounds segment.

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