Rhodia Exec Outlines Strategy

The Chemical Notebook recently had a telephone interview with Pascal Juery, president of Rhodia’s Novacare arm, to talk about Rhodia’s acquisition of Feixiang Chemicals. His reasoning wasn’t fancy or convoluted. That is usually a good sign. Another good sign is that the $489 million that Rhodia paid for Feixiang doesn’t seem too steep. The company says the purchase will be accretive from year one, an indication of a reasonable price. Moreover, Rhodia is paying a multiple of 9x EDITDA (earnings before interest, taxes, depreciation, and amortization), which given Feixiang’s record of 20% growth and improving profitability over the past five years, seems like an attractive value for Rhodia. As for the rationale of the acquisition, Juery points to its purchase last year of Chicago-based surfactants maker McIntyre Group. Feixiang makes a similar range of surfactants and is also back integrated into specialty amines. Feixiang, with about $250 million in annual sales, is a bit bigger than McIntyre, which had about $150 million in revenues at the time of the acquisition. Juery says that Feixiang builds on Rhodia’s earlier success with McIntyre. When Rhodia made the acquisition, it had a target of doubling McIntyre’s EBITDA in two years. That goal had been accomplished in less than a year and a half. Obviously, the Feixiang purchase is also about geography. “We are gaining exposure to a dynamic market,” Juery says. About 70% of Feixiang sales are in Asia, mostly in China and SE Asia. And, when you look at its website, you see names of “partners” like Unilever and P&G. Those are the kinds of customers you want to see in a specialty surfactants company. Here another interesting tidbit about Feixiang: While its main plant is in Zhangjiagang, it is building another plant in the south of China that will be ready by the end of this year.

Author: Alex Tullo

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