ADA-ES would be excellent fit for Albemarle, says CFO
ADA-ES (Nasdaq: ADES), the Littleton, Colorado-based specialty chemicals company, would be an "excellent" acquisition candidate for Albemarle Corp, said ADA-ES's CFO Mark McKinnies.
ADA-ES's activated carbon is used to reduce mercury emissions from coal-fired power plant boilers, an area that Baton Rouge, Louisiana-based Albemarle strengthened after its USD 22m acquisition in June of Twinsburg, Ohio-based Sorbent Technologies.
Asked if he thought ADA-ES could interest Albemarle, McKinnies said: "Perhaps. They [Albemarle] have to buy their activated carbon from some place because they don't manufacture it. Obviously, with private equity partners [involved in ADA-ES], they're not the longest term holders. They're going to look at selling at some point in time and Albemarle would be an excellent candidate."
Private equity firm Energy Capital Partners (ECP) is poised to own about 35% in ADA-ES if shareholders approve their 50/50 joint venture to construct an activated carbon plant.
ADA-ES has a market capitalization of USD 25m, although its stock price is trading at a third of its level in June.
McKinnies said management was not concerned that ADA-ES's low share price could draw a takeover bid, saying any would-be acquirer would have to pay ECP a breakup fee of a couple million dollars plus ECP's legal fees of USD 1.5m. He added that the board would perform its fiduciary responsibility and evaluate offers.
ADA-ES's joint venture with New Jersey-based ECP, announced in October, is for a USD 350m plant that can produce 125 to 175 million pounds of activated carbon per year and expected to come on-line in 2010. Perella Weinberg Partners and Cargill subsidiary Black River Asset Management LLC were among those showing interest in a process run by Credit Suisse, but they only wanted to buy shares at the corporate level while ADA-ES wanted to find a participant in the activated carbon project.
The facility will be funded with 40% equity and 60% debt. ECP and ADA-ES will have to stump up USD 70m each for the equity part, with USD 45m coming from ECP's purchase of convertible preferred shares in ADA-ES and another USD 25m coming from a prior PIPE transaction.
To fund the debt portion of the activated carbon project, Credit Suisse was mandated to raise USD 210, expected to be a mixture of senior secured and mezzanine funding. ADA-ES expects to get a low B from rating groups and place that debt by the end of the first quarter next year, said McKinnies. If it fails to raise the debt, ADA-ES's alternatives include equity financing from ECP, said McKinnies.
Neither of ADA-ES’s direct competitors, Holland-based Norit nor Pittsburgh, Pennsylvania-based Calgon Carbon, were as aggressive as ADA-ES felt they needed to be to meet the growth it expects in activated carbon, he added.
ADA-ES also sells powdered activated carbon injection systems, mercury measurement instrumentation and provides mercury emission control services. The company also develops refined coal technology and sells other chemicals for coal-fired boilers.
ADA-ES's activated carbon is used to reduce mercury emissions from coal-fired power plant boilers, an area that Baton Rouge, Louisiana-based Albemarle strengthened after its USD 22m acquisition in June of Twinsburg, Ohio-based Sorbent Technologies.
Asked if he thought ADA-ES could interest Albemarle, McKinnies said: "Perhaps. They [Albemarle] have to buy their activated carbon from some place because they don't manufacture it. Obviously, with private equity partners [involved in ADA-ES], they're not the longest term holders. They're going to look at selling at some point in time and Albemarle would be an excellent candidate."
Private equity firm Energy Capital Partners (ECP) is poised to own about 35% in ADA-ES if shareholders approve their 50/50 joint venture to construct an activated carbon plant.
ADA-ES has a market capitalization of USD 25m, although its stock price is trading at a third of its level in June.
McKinnies said management was not concerned that ADA-ES's low share price could draw a takeover bid, saying any would-be acquirer would have to pay ECP a breakup fee of a couple million dollars plus ECP's legal fees of USD 1.5m. He added that the board would perform its fiduciary responsibility and evaluate offers.
ADA-ES's joint venture with New Jersey-based ECP, announced in October, is for a USD 350m plant that can produce 125 to 175 million pounds of activated carbon per year and expected to come on-line in 2010. Perella Weinberg Partners and Cargill subsidiary Black River Asset Management LLC were among those showing interest in a process run by Credit Suisse, but they only wanted to buy shares at the corporate level while ADA-ES wanted to find a participant in the activated carbon project.
The facility will be funded with 40% equity and 60% debt. ECP and ADA-ES will have to stump up USD 70m each for the equity part, with USD 45m coming from ECP's purchase of convertible preferred shares in ADA-ES and another USD 25m coming from a prior PIPE transaction.
To fund the debt portion of the activated carbon project, Credit Suisse was mandated to raise USD 210, expected to be a mixture of senior secured and mezzanine funding. ADA-ES expects to get a low B from rating groups and place that debt by the end of the first quarter next year, said McKinnies. If it fails to raise the debt, ADA-ES's alternatives include equity financing from ECP, said McKinnies.
Neither of ADA-ES’s direct competitors, Holland-based Norit nor Pittsburgh, Pennsylvania-based Calgon Carbon, were as aggressive as ADA-ES felt they needed to be to meet the growth it expects in activated carbon, he added.
ADA-ES also sells powdered activated carbon injection systems, mercury measurement instrumentation and provides mercury emission control services. The company also develops refined coal technology and sells other chemicals for coal-fired boilers.
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