Gulf Oil International subsidiary Houghton International has entered a definitive agreement to collaborate with Quaker Chemical to form a combined company within the method fluids and speciality chemicals sector.
The combined company also will give technical experience to the world primary metals and formation industries.
Under the agreement, Quaker Chemical can pay Houghton International shareholders $172.5m in cash and 24.5% ownership of the combined company represented by nearly 4.3 million shares as consideration for this acquisition.
Quaker Chemical will also assume Houghton International’s debt and cash, with net debt of approximately $690m at the end of last year.
Quaker Chemical chairman and CEO Michael Barry said: “The proposed combination of Quaker Chemical and Houghton International represents the next phase of our evolution, and stays true to the vision of growing in our core specialties.
“Joining forces with Houghton International combines two highly complementary businesses, each having a long history of building tremendous expertise, technology and customer-centric cultures dedicated to delivering long-term sustainable value to customers, shareholders and associates.”
The transaction is already approved by the board of directors of both companies with the support of the Hinduja Group, which will become Quaker Chemical’s largest shareholder. The Hinduja Group is the owner of Gulf Oil International.
Houghton International chairman Sanjay Hinduja said: “Together, we will strengthen our capabilities and business models to better serve the global market and all our stakeholders.”
The combined company is expected to serve various industries, including automotive, aerospace, heavy equipment, mining, machinery, marine, offshore and container industries.
It will be delivering specialty products that include removal fluids, forming fluids, protecting fluids, heat treating fluids, industrial lubricants and greases.
The combination would also help in expanding to growing markets of India, Korea, Japan, and Mexico.
The new company is also expected to invest and develop innovative technology, accelerate its product development initiatives and time to market, and diversify its long-term R&D pipeline.
For this transaction, Quaker has secured $1.15bn financing commitment from Bank of America Merrill Lynch and Deutsche Bank Securities.
The completion of the transaction, expected by the end of this year or early 2018, is subject to customary closing conditions including regulatory approvals and approval by Quaker Chemical shareholders.
Last year, Quaker Chemical generated revenues of $747m, $107m of adjusted EBITDA, and $22m of net cash.
In the same period, Houghton International had revenues of $767m, $120m of adjusted EBITDA, and $690m of net debt.