OpenGate carves out $150m chemicals business, setting eyes on growth

The PE firm signs an agreement with Solvay SA for the second time.

OpenGate Capital has inked a deal to buy Solvay’s US and Europe amphoteric surfactant units, aiming to bulk up the platform and capitalize on the natural-based ingredient trend.

The PE firm has an almost decade-old history with the publicly traded Belgium chemicals company, starting with the carve-out of Benvic, a PVC compound business in 2014.

“We have had continuous dialogue with Solvay every year where we looked at the other business they have been selling too,” said Matthias Gundlach, managing director at the firm. Benvic was sold off to European private equity firm Investindustrial after an almost four-year hold.

With this acquisition, OpenGate intends to grow the manufacturing business beyond its $150 million in revenue through additional add-ons. Gundlach confirmed that the PE firm is already looking at opportunities with intentions to add technology, size and geography as well as rebrand the target.

“Our strategy is to focus on the natural, mineral oil free-based ingredient trend.” Gundlach added.

Amphoterics are primarily utilized in body care, hair care, and home care products. The strategy is based on the view that softer natural-based ingredients will be a long-term sustainable driver.

With regards to what attracted the PE firm, Gundlach said, “we like the global positioning; being able to buy into a business that has strong relationship with brands like Unilever and the likes.” The unit supplies to the classic Johnson’s baby shampoo brand.

Surfactants are also a key ingredient in industrial cleaning, which generated additional usage during covid. “We are not in the disinfectant category, but we are in hand soaps,” the investor said.

The transaction is the second chemical investment from the $585 million OpenGate Capital Partners II, a source told PE Hub.

The process, which kicked off roughly a year ago, involved other European and US PE firms that had experience in the chemical space. The listed company did not approach strategics because of the complex nature of the transaction, the source added.

The deal, which is expected to close within the next 90 to 100 days, includes long-term supply and tolling contracts. These agreements allow the target to continue purchasing products from Solvay, and at the same time manufacture a base chemical for the former parent company.

The transaction requires clearance from antitrust authorities in different jurisdictions. However, given that OpenGate has no other business in the amphoteric space or adjacent markets, “there’s no real risk here,” Gundlach said.