Silverfleet Capital

Finnish Chemicals

The company

Finnish Chemicals, now renamed Kemira Chemicals and part of the pulp and paper chemicals segment of Kemira, is the largest producer of sodium chlorate in the Nordic region. Sodium chlorate is the main bleaching agent used in the production of the chemical pulp used in papermaking. In addition the company produces chlorine dioxide, chloralkali products and sodium borohydride, as well as having the largest caustic soda distribution business in Finland. Through the $96 million acquisition of Huron Tech in 2000 the company also became the fourth largest sodium chlorate producer in North America.

Investment rationale

Based in Finland and therefore in close proximity to its customer pulp mills, Finnish Chemicals had a strong domestic market position, proprietary technology and a high level of profitability. In support of an experienced chemical industry executive, who bought into the business alongside us, we saw the opportunity to develop the company through adding additional capacity in certain product lines and also to use it as a platform for buy and build in pulp and paper chemicals.

Value creation

The first step was to re-orientate the business towards its customer industries and away from functional lines thereby bringing a greater focus on providing services as well as products. This was followed by a significant investment into a new sodium borohydride manufacturing plant.

In 2000 the company acquired Huron Tech Corp. based in the South East USA for $96 million making it the fourth largest supplier of sodium chlorate in the North American market. In addition the businesses built sodium chlorate storage capacity in Sweden allowing it to win long-term supply contracts in that country.

As one of the largest buyouts completed in the Nordic region at the time, this was a landmark deal in which we used our UK deal-doing experience to complete an investment in a market where very few such transactions had ever taken place. The platform company was then expanded significantly through successful entry into key markets such as Sweden and the USA. At the same time additional capacity was added in complex high margin products and in value-added services.

Outcome

In April 2005 after a focussed auction process the business was sold to Kemira, Finland’s largest chemical company, in a transaction that generated a more than 4x money multiple.