After a drawn out negotiation period, Macquarie Infrastructure and Real Assets (MIRA) belatedly closed on the acquisition of the largest German chemical park operator, Currenta.
Though Currenta also provides various other business services, its ownership of three chemical manufacturing plants under the Chempark brand meant this deal was treated as a quasi-infrastructure deal.
The first of its kind in Germany, this deal could inspire other acquisitions of chemical plants by infrastructure investors, despite the complications with this pathfinder deal.
An infrastructure asset
The privatisation of East Germany’s enterprises in 1990 saw chemical sites with shared resources and distribution networks split up into individual operations and sold to private investors – predominantly big players in the chemical industry.
Currenta, jointly owned by Bayer (60%) and Lanxess (40%), is the manager and operator of the three chemical sites in the Chempark brand:
It manages site services, utility supply and disposal and service provisions. The company serves 70 companies in the chemical sector and other sectors. Lanxess is a major customer of Currenta, while Bayer spin-off Covestro, a polymer materials producer, is another important customer.
There are high barriers to entry for competitors, an infrastructure specialist adviser told IJGlobal, as Currenta uses long-term fixed contracts making it difficult for customers to move sites. However, another source has said that there is limited ability to attract new customers to the sites.
As operator of Chempark’s sites, Currenta is responsible for expanding the essential infrastructure available to the customers such as roads, pipelines, containment facilities, wharfage, lighting, security perimeters and rail sidings. The company also acts as the contact with local authority and supports clients in obtaining permits and licences.
Currenta has three disposal plants for hazardous waste and has assets producing steam and electricity and wastewater treatment facilities.
The market factors surrounding Currenta, as well as the tangible nature of the chemical plant assets share similar features with traditionally attractive infrastructure investments.
After Bayer acquired US agrochemical business Monsanto, it sought to relieve some debt from the acquisition – and the unwelcome lawsuits that came along with it – by placing its 60% stake of Currenta on sale. The Chempark operator was deemed a non-strategic investment and was put on the market in October (2018).
Bayer initially had planned to sell the Currenta stake to its former industrial chemicals subsidiary Covestro, but could not reach an agreement on valuation. It was widely reported that only Bayer was interested in selling their stake, as Lanxess – a major customer of Currenta – wanted to retain its 40% interest in the firm.
Bayer kicked off a formal bidding process which peaked the curiosity of a flurry of infrastructure investors including DWS, CVC Capital Partners, 3i and OMERS Infrastructure. Final bids were due in January (2019) and MIRA was chosen in March to enter exclusive negotiations for the asset.
At this time, Lanxess opened up discussions to sell its 40% stake – trusting MIRA’s reputation as a long-term owner seeking service supply contracts – toying with the option to keep its strategic interest without holding a stake.
After a long negotiation process due to complexities surrounding the deal with pension obligations and carve outs, MIRA now holds 100% of the asset and long-term contracts with both sellers.
MIRA acquired 100% of Currenta for an an equity value of €1.95 billion ($2.18 billion). The asset itself has a total enterprise value of €3.5 billion before a €1.55 billion deduction of net debt and pension obligations. In addition to the sale, Bayer is also selling to Currenta an extensive package of real estate and infrastructure for €180 million to strengthen the company.
MIRA is acquiring Currenta through two funds, Macquarie European Infrastructure Fund 5 and Macquarie European Infrastructure Fund 6, and financing 65% of the investment with equity from the funds and 35% through external bank leveraging.
The following banks are rumoured to be lending the approximate €1.2 billion towards the acquisition:
- Deutsche Bank
- JP Morgan
Negotiations were drawn out due to pensions being partly unfunded, limiting the amount of additional debt the incoming shareholder could place on the business. It is also rumoured that the future pension obligations had to be paid in cash during the time of the acquisition.
But after a cooperative negotiation, long-term contracts were signed with both Bayer and Lanxess allowing the latter to remain a customer to Currenta while divesting the asset and freeing their hands for other investments.
Lanxess is said to have signed a 10-year contract to remain a Currenta client until 2029.
The deal with Bayer is expected to be completed in Q4 of this year, and Lanxess will divest its stake by the end of April 2020.
The acquisition of Currenta may be the first of many chemical parks to change ownership from the traditional chemical conglomerate to long-term infrastructure investor.
Macquarie’s advisers on the transaction are:
- Deutsche Bank – financial
- Clifford Chance – legal
- DNV GL – technical
Bayer was advised by:
- Morgan Stanley – financial
- Baker Mckenzie – legal
LANXESS was advised by:
- White & Case – legal