Arsenal Capital Partners has returned to the chemicals space, acquiring specialty chemicals maker Reilly Industries in a $250 million (€207 million) deal. The New York-based firm was opportunistic in the purchase, jumping in after Reilly had been sold to another private equity buyer in a deal that ultimately fell apart.
Arsenal has frequently turned to the chemicals industry in the past, and Arsenal co-founder Barry Siadat has previous experience in the space, having once served as a corporate vice president and chief growth officer of Allied Signal (now part of Honeywell). The firm’s portfolio includes investments in specialty chemicals outfit Rutherford Chemicals, coatings maker Sermatech International and Interdynamics, a chemicals packager. Arsenal is also expecting to announce a separate chemicals investment later this week.
Regarding the Reilly investment, Arsenal vice president Jack Norris told PEO that the firm was primarily attracted to its leadership position in a number of niche markets. Specifically, Reilly is among the global leaders in the production of pyridine (used in the agrochemical, pharmaceutical and nutrition sectors), while its subsidiary, Morflex, is the No. 1 producer of DEET insect repellant.
Additionally, Reilly is among the market leaders in the production of citrates, an alternative to phthalates, which have come under fire after animal tests linked the chemical to possible kidney and liver damage.
Arsenal used its $300 million inaugural fund for the transaction. Silver Point Capital, DB Zwirn & Co. and Wells Fargo Foothill provided the debt financing, which is reported to cover around 60 percent of the purchase price. Certain Reilly shareholders will retain a stake in the company, reported to represent roughly a third of the business.
Goldman Sachs advised Reilly on the sale, and law firm Skadden Arps Slate Meagher & Flom served as legal counsel. Akin Gump Strauss Hauer Feld represented Arsenal Capital in the transaction.
Arsenal is reportedly close to launching its follow-on fund, Arsenal Capital Partners II, which market sources have indicated will be seeking around $450 million. Norris declined to comment on the potential fundraising.
Arsenal was launched when Terrence Mullen left Thomas H. Lee Partners in 2000 to start the firm with Siadat and GeoCapital vet Mark Diker. Diker has since left the group to form his own hedge fund boutique, but Arsenal has brought on James Marden, formerly of Medical Logistics, and Jeffrey Kovach, another Thomas H. Lee vet, to join Mullen and Siadat as managing directors.