By John Revill
ZURICH (Reuters) -Swiss chemicals company Sika will buy construction chemicals maker MBCC from Lone Star in a 5.5 billion Swiss franc ($6.03 billion) deal, it said on Thursday, as it steps up its acquisition strategy in the fragmented $70 billion sector.
Sika said it was buying MBCC Group, the former BASF Construction Chemicals, from an affiliate of Lone Star Funds, the private equity firm.
The deal represents a multiple of 11.5 times MBCC’s expected 2022 earnings before interest, tax, depreciation and amortisation, Sika said. It expects to achieve synergies of 160 million–180 million francs, bringing the multiple down to 8.5.
It would finance the deal, which it expected to be “strongly accretive” to earnings per share from the first full year after closing, with a bridge loan.
Sika said it remains committed to maintaining a strong investment grade credit rating and intends to put in place long-term funding comprising a combination of cash on hand, bank loans, and capital markets instruments.
MBCC, based in Mannheim, Germany, expects 2021 sales of 2.9 billion Swiss francs from selling construction systems and chemical admixtures.
“Together we will reinforce our complementary range of products and services across the entire construction life cycle,” Sika Chief Executive Thomas Hasler said in a statement.
The move for MBCC represents a step change for Sika, which has bought seven small companies in China, Mexico, the United States, Japan, Brazil and Russia this year.
Sika, whose products are used to waterproof and strengthen cement, is stepping up acquisitions aiming to increase its share of the construction chemicals market from around 10% now to 12% by 2025.
Sika expects the market to increase to around 80 billion francs per year by 2025 from 70 billion francs at present, with government stimulus programmes and trends towards more sustainable building fuelling a global infrastructure boom.
Baader Helvea analyst Markus Mayer said it was surprising that Sika was acquiring the former BASF business for a 64% uptick over the price Lone Star paid in 2019 after Sika had at the time flagged several weak points of the business.
“To turn around the weak spots of MPCC will be one of the most challenging tasks for Sika,” Mayer said. “In contrast, the integration track record of Sika is very strong and therefore if anyone can turn around the business it might be Sika.”
Sika had said it would return to a more active acquisitions policy in 2021 after coronavirus restrictions limited its ability to analyse takeover targets in 2020.
($1 = 0.9127 Swiss francs)
(Reporting by John Revill; additional reporting by Brenna Hughes Neghaiwi; Editing by Michael Shields and Susan Fenton)
