Bloomberg
Croda International Plc, the world’s second-largest maker of cosmetic ingredients, agreed to buy a Chinese maker of fatty-acid products for 38.2 million pounds ($58.8 million) to tap growing demand for lubricant additives for cars.
The U.K. supplier of sunscreen to Nivea will acquire a 65 percent stake in Sichuan Sipo Chemical Co. from Sichuan Forever Holding Co., Snaith, England-based Croda said today. It’s paying a multiple of almost 19 times earnings before interest, taxes, depreciation and amortization, based on 2012 profit of 3.1 million pounds.
“The reason behind the valuation from our point of view is that it gives us fast growth and specializes the business quickly, so there should be a margin improvement and growth story,” Chief Executive Officer Steve Foots said in an interview. “It allows us a ready entry into a market that we’re starting to know much better.”
Sipo will become part of Croda’s Performance Technologies division, which has come to the fore amid competition and a slowdown in growth in the cosmetic-ingredients business that was the main growth driver. Foots is trying to address the performance unit’s skew toward Europe and get margins close to the levels achieved for consumer-product ingredients.