Vertellus to be acquired by lenders after no other bids surface

Indianapolis-based chemical company Vertellus Specialties Inc., which filed for Chapter 11 bankruptcy protection May 31, is set to be taken over by its lenders next week because no other parties expressed interest in buying the company.

As part of the bankruptcy case, Vertellus reached an agreement with its lenders for them to purchase the company for $453.8 million. The offer is in the form of a credit bid, in which the lenders offer to cancel debt.

As part of the sale process, other interested parties had until Aug. 29 to submit bids on Vertellus. That deadline has come and gone, and there were no outside bidders.

Court filings refer to the lenders group as the Stalking Horse Purchaser. Other court filings identify the group as Valencia Bidco LLC, a Delaware-based corporation formed several days before Vertellus filed for bankruptcy.

A court hearing to approve the sale to Valencia Bidco is scheduled for Sept. 7 in U.S. Bankruptcy Court for the District of Delaware.

Vertellus said it expects to remain in operation after the sale.

In a statement e-mailed to IBJ via an outside public relations firm, the company wrote: “The agreement with the existing term loan lenders gives Vertellus Specialties Inc. the opportunity to implement its go-forward business strategy under the leadership of its existing management team. For the most part, Vertellus Specialties will continue operating just as it does today, maintaining production at the highest standards for quality, safety and environmental responsibility.”

Vertellus, one of the world's largest makers of Deet insect repellent, produces specialty chemicals for a variety of uses, including agriculture, nutritional, pharmaceutical, medical and personal care. Its owner is Wind Point Partners, a Chicago-based private equity firm.

Vertellus’ largest facility is its South Tibbs Avenue plant, which employs some 243 workers. The company also has operations elsewhere in the U.S. as well as Europe and Asia.

The company has cited a slowing demand for its pyridine and picoline products and an increase in production from Chinese competitors as reasons for its financial troubles.

Pyridine is a compound used in herbicides, insecticides, vitamin B3 and even Head & Shoulders shampoo. Picoline is a compound often used in agricultural chemicals.

Last month, Vertellus informed the Indiana Department of Workforce Development that it would shut down a portion of its Indianapolis plant this fall, affecting 40 to 50 employees.

Vertellus’ Chapter 11 bankruptcy case does not include all parts of the company. Elma, Washington-based Vertellus Performance Chemicals is excluded from both the sale and the bankruptcy, and it will remain under the ownership of Wind Point Partners.

On Wednesday, Vertellus Performance Chemicals filed a limited objection to the Vertellus Specialties sale.

In a court filing, Vertellus Performance Chemicals said it is concerned that a sale would affect a shared services agreement that it has had with Vertellus Specialties.

Under the terms of this agreement, Vertellus Performance Chemicals pays Vertellus Specialties to perform technology support, billing, shipping and other business functions.

Vertellus Performance Chemicals said in its court filing that it has been unable so far to reach an agreement with the Stalking Horse group to continue providing these services.

“While VPC does not oppose the sale generally, VPC is concerned that if the parties remain unable to reach agreement prior to the sale hearing, there will be an interruption in the services that VPC receives which will be detrimental to VPC’s business,” Vertellus Performance Chemicals said in its filing.

Also in that filing, Vertellus Performance Chemicals noted that it is continuing its efforts to negotiate with the Stalking Horse on this issue but filed its objection “out an abundance of caution in the event that such an agreement is not reached before the sale hearing.”