Acquisition expands Evonik’s silica horizons

The acquisition of a new business will see Evonik Industries AG extend its silica activities beyond tyres and other industrial applications. Evonik has acquired the silica business of US-based firm J.M. Huber for $630 million, a deal it says will enable Evonik to “expand its position in North America and Asia in this profitable and resilient business.”

According to Evonik, is growing at an annual rate of four to six per cent. To date, the company’s silica business has mainly focused on industrial applications, for example in the tyre and coatings industries, therefore the acquisition of the consumer-oriented Huber business opens up a whole new area. “Combining the complementary silica businesses of Evonik and Huber will strengthen an important pillar of our portfolio,” says Christian Kullmann, Executive Board member for strategy at Evonik. “Also, Huber Silica is an excellent regional fit with its focus on the US, China and India.”

“Huber Silica will significantly strengthen our growth segment resource efficiency,” adds Executive Board chairman Klaus Engel. “In addition, it offers the opportunity to strategically develop Evonik’s portfolio.” Mike Marberry, president and chief executive officer of Huber, shares that while it is “difficult to part with a longstanding business” – Huber’s silica business dates back to the 1950s – it views Evonik as “an excellent strategic fit for both our silica customers and employees.”

For the 2016 financial year, Huber Silica is expected to achieve sales of close to US$300 million and an EBITDA of $60 million. This corresponds to an EBITDA margin of more than 20 per cent. Through the ideal complementarity of the two business areas, Evonik expects to generate synergies of $20 million, largely in the areas of production, logistics and procurement as well as through harmonisation of the product portfolio. Evonik expects to have all synergy measures implemented by 2021.

The transaction is scheduled to be completed in the second half of 2017, subject to approval by the responsible authorities. The acquisition is likely to have a positive impact on Evonik’s adjusted earnings per share as early as the first full financial year. Financing has been secured through Evonik’s own funds and committed credit facilities.