(Reuters) – Dutch food and dietary supplements maker DSM will sell a 65 percent stake in two of its chemicals subsidiaries to CVC Capital Partners for at least 300 million euros ($316 million) in cash.
DSM said the disposal will make its earnings less cyclical and allow it to focus on its nutrition and high-performance materials business.
“We believe we got a full price, with upside from the earn-out,” said Chief Executive Feike Sijbesma on a conference call, referring to a provision that the company may receive a bonus later if the disposed operations perform well.
Under the deal, DSM will place its polymer intermediates and composite resins businesses into a new company, with CVC taking a 65 percent stake and DSM retaining 35 percent.
The new company had pro-forma sales of 2.1 billion euros in 2014 and core earnings of 106 million euros, as measured by earnings before interest, taxes, depreciation and amortisation of goodwill. DSM said the business’s enterprise value, including at least 100 million in debt, is 600 million euros.
DSM would not disclose exactly how much of that value is equity and how much debt, but it expects to receive between 300 million and 350 million euros in cash from CVC when the deal closes in the third quarter.
DSM may receive up to an additional 175 million euros later if the new company meets undisclosed performance goals.
Analyst Mutlu Gundogan of ABN Amro, who rates shares a sell, said the deal valued the businesses at 16 percent less than he had estimated.
“We nevertheless believe the market will react positively to this news, as DSM becomes a more pure play on nutrition,” he said in a client note.
DSM shares rose 2.2 percent to 52.18. Its stock has underperformed the broader AEX index by about 17 percent over the past year, as vitamin E prices slumped and DSM was punished for having significant operations in Switzerland when the Swiss franc soared.
The chemicals businesses being sold on Monday include production of caprolactam, used in making nylon, and acrylonitrile, used in synthetic rubbers. Composite resins are used in gel coatings and adhesives.
DSM, which announced its intention to sell the activities in November, will book a loss of 130 million euros on the disposal in the first quarter.