Solutia Inc. announced today it has signed a deal to sell its nylon business to an affiliate of SK Capital Partners II, L.P., a New York-based private equity firm focused on the chemical, material and health care sectors. While part of the agreement calls for Solutia to receive a two percent equity stake in the newly formed company, according to Solutia spokesman Dan Jenkins, “for all intents and purposes we will no longer be in the nylon business.”
According to SK Capital Partners, the deal is expected to close around April 30. Frederic Poses, formerly CEO of American Standard and COO of AlliedSignal Inc., has been tapped to “lead an experienced management team with extensive industry experience in the integrated nylon business,” SK said.
“This is a good business with solid fundamentals, a strong customer base and top talent that has been significantly impacted by these difficult economic times,” said Barry B. Siadat, co-founder and managing director of SK Capital Partners. “We are excited about investing in Solutia’s integrated nylon business, partnering with their management team and with Fred Poses, a highly successful executive who has the requisite experience in leadership and execution.”
The sale of Solutia’s nylon business includes its management and employees, as well as the St. Louis-based company’s five manufacturing plants in Alvin, Texas (Chocolate Bayou); Decatur, Ala.; Greenwood, S.C.; Pensacola, Fla.; and Foley, Ala. At the closing of the sale, Solutia will receive $50 million in cash and $4 million in deferred cash payments to be paid in annual $1 million installments beginning in 2011. Additionally, the agreement includes a minimum level of working capital. Solutia said it will use the nylon sale proceeds to pay down debt under its asset-based revolving credit facility.
After the sale, the affiliate of SK Capital will assume substantially all of the liabilities of the nylon business, including employee and pension liabilities relating to the active employees of the business, and environmental liabilities, Solutia said. In addition, SK Capital will secure replacement of $25 million of letters of credit associated with the nylon business.
"We believe this transaction positions the nylon business to achieve its full potential," said Jeffry N. Quinn, chairman, president, and CEO of Solutia. "The business was the core of Solutia for many years and before that was the centerpiece of the former Monsanto's chemical business for decades. The combination of the highly dedicated men and women of the business along with the experienced SK Capital team marks the beginning of a new chapter for the business."
James M. Sullivan, Solutia’s exec vp and CFO, added, "Despite the challenging global economic conditions, we are pleased to have reached an agreement with SK Capital that provides fair value to Solutia stakeholders and advances the overall strategic positioning of the company."
Jenkins noted that after the sale, Solutia will focus on three areas of its business: its Saflex interlayer for laminated glass, CPFilms aftermarket window films, and technical specialties chemicals and products. “Those are the three businesses that will be the core of Solutia going forward,” he told NFT.
Solutia to sell nylon business to equity firm; Poses to head new company
April 1, 2009