Arsenal Capital Partners will more than quadruple its investment with the sale of Flowchem Ltd to KMG, sources said. The New York private equity firm completed the $495 million sale June 15.
Founded in 2001, Flowchem is the Waller, Texas, supplier of drag-reducing agents for oil and fuel pipes. DRAs are specialty chemicals injected into midstream pipelines to reduce friction near the pipeline walls and within the turbulent fluid flowing through the pipeline network.
With the sale to KMG, Arsenal will make 4.2x its money and the deal will produce a 50 percent IRR, one source said.
The New York lower-middle-market firm acquired Flowchem in December 2013. How much it invested is unclear. One month later, Triangle Capital Corp said in a statement that it invested $8.8 million in Flowchem. Whether Triangle sold its stake to KMG is also unclear.
Arsenal invests in specialty industrials and healthcare. In March, BioreclamationIVT, an Arsenal portfolio company, acquired TransCell Science.
The PE firm used its third fund, which collected $875 million in 2012, to buy Flowchem. Arsenal is investing out of its fourth fund, which closed at its $1.3 billion hard cap in October 2016, Buyouts reported.
KeyBanc Capital Markets provided financial advice to Flowchem and Arsenal, while Kirkland & Ellis and Jones Day were their attorneys. ADI Analytics provided advisory services.
Executives for Flowchem and KMG could not immediately be reached for comment.
Action Item: Contact John Televantos, Arsenal partner and co-head of the specialty industrials group, at jtelevantos@arsenalcapital.com
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