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Growth-minded Vertellus buys Dow Chemical unit

December 5, 2014

Indianapolis-based chemical producer Vertellus Specialties Inc. has announced its second big acquisition in as many months, agreeing to purchase a unit of Dow Chemical Co. in a deal believed to be worth as much as $200 million.

Vertellus, which ranked in IBJ's 2014 Indiana 100 as the 22nd largest private company in the state, said Friday that it would buy Dow’s sodium borohydride (SBH) business, which includes a manufacturing facility in Elma, Washington.

Dow announced the sale on Friday as one of two major divestitures, together worth $225 million. A Dow spokeswoman declined to specify the value of the SBH business, but told IBJ that it represented “the bulk” of the $225 million.

Reuters reported in August that Dow intended to sell the SBH unit, and that sources believed it could fetch as much as $200 million—or about seven times the $28 million it earns annually before interest, taxes, depreciation and amortization.

A Vertellus representative on Friday declined to reveal financial details of the deal.

In November, Vertellus announced that it had purchased chemical manufacturer Pentagon Chemicals UK Ltd. Terms of the deal were not disclosed, but Vertellus said that Pentagon would increase its annual revenue by 13 percent. Based on its $570.7 million in revenue in 2013, Vertellus could expect another $74 million in sales.

Vertellus has not been coy about its intention to augment its life sciences business both through internal growth and by acquisition. The firm was acquired in late 2007 by Chicago private equity firm Wind Point Partners with the intention of building the company and then selling it.

“It will probably be another two to three years to the point where the company is in a position where it can be sold and they can get the return they want,” Vertellus CEO Rich Preziotti told IBJ earlier this year.

Sodium borohydride is primarily used as a synthesis and process aid in the production of a wide variety of pharmaceutical ingredients, including high-growth antiretrovirals for the treatment of HIV/AIDS. It is also used in bleaching applications, such as mechanical wood pulping for newspaper and tissue production.

“Vertellus is impressed with the SBH business’ market leading position, [and] we are excited about the opportunity to serve the high-growth synthesis segment from the SBH business’ world class manufacturing facility in Elma, Washington,” Preziotti said in a prepared release.

About 75 employees in the SBH business will join Vertellus as a result of the deal.

Vertellus is a leading manufacturer of Deet insect repellant. The chemical pyridine, a compound used in herbicides, insecticides, vitamin B3 and even Head & Shoulders shampoo, generates a big hunk of Vertellus' revenue.

Another group of chemicals derived from castor oil finds its way into paints, polymers used in aerospace and medical, and additives in plastics, among other uses.

Vertellus sells more than 500 products to 2,000 customers around the world and employs more than 1,000 people globally. In addition to its Indianapolis plant, it has several locations in the United States and abroad. The Indianapolis plant employs 250, and its downtown headquarters has 44.

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