4x Exit Bolsters NY Shop’s Fundraise

Arsenal Capital Partners’ sale of Novolyte Technologies should bolster the New York-based firm’s campaign to raise a third fund.

Arsenal Capital announced on April 26 it was selling the manufacturer and supplier of electrolytes used in lithium ion batteries to the $60 billion chemical multinational BASF. Terms were not disclosed, but a source familiar with the deal told Buyouts earlier today that Arsenal Capital will post a return of more than 4x its invested capital and an IRR of more than 50 percent.

That should please investors weighing whether or not to commit to Arsenal’s third fund, which is in the market right now. The firm was expecting to hold a first close at $300 million for the fund, Arsenal Capital Partners III LP, by the end of April, sister Web site peHub reported. The firm is seeking a total of $750 million for the fund.

Arsenal Capital, which has made a specialty of investing in chemical companies since its founding in 2000, carved Novolyte out of Ferro Corp. in 2008. The firm had actually planned on holding the company a couple more years but was getting in-bound queries from corporations eager to tap into rising demand for lower-cost, high quality lithium batteries that are expected to be critical in making electric and electric-gasoline hybrid cars, John Televantos, a partner at Arsenal Capital, told Buyouts.

“That is going to be the future of transportation,” Televantos said. “This company is positioned to be a leading supplier, so you can see why BASF would be interested.”

Critical in Arsenal Capital’s investment in the Cleveland-based company was inking a partnership with Korean company Foosung Co. Ltd, a producer of raw material used in electrolytes, which enabled Novolyte to be a more integrated, comprehensive supplier of higher quality electrolytes at a lower cost, Televantos said. The firm also invested in the company’s marketing efforts, he said.

Terrence Mullen and Jeffrey Kovach left Thomas H. Lee Partners to form Arsenal Capital in 2000. The firm targets equity investments of $25 million to $75 million in deals with enterprise values of $30 million to $400 million. Besides specialty chemicals and materials, the firm targets the broader specialty industrial sector, as well as health care and financial services.

Image credit: Arsenal Capital

Bernard Vaughan is a senior editor at Buyouts Magazine. Follow his tweets @BVaughanReuters. Follow Buyouts tweets @Buyouts.