The Blackstone Group L.P. BX recently announced its acquisition of Armacell, a Germany-based producer of flexible insulation foams, from European private equity investment firm, Charterhouse Capital Partners. According to sources, Armacell had attracted interest from The Carlyle Group LP CG and KKR & Co. L.P. KKR as well.
Armacell is a leading provider of flexible insulation foams as well as engineered foams. Notably, the firm’s “complex production processes with a steep learning curve, proprietary product formulas, and strict quality controls” have acted as strong barriers to entry for any major competitor in the market over the last 25 years. This has helped Armacell secure a leading position.
Notably, the company operates 23 manufacturing plants in 16 countries, spanning across 4 continents. It primarily conducts business in Europe, the Middle East, Asia and the Americas.
According to Armacell’s fiscal 2014 annual report, the firm recorded 13% growth in revenues during 2011−2014. Moreover, revenues jumped close to 9% year over year in 2014, of which 7.3% stemmed from organic growth, while 1.5% reflected benefits from recent acquisitions.
Lionel Assant, Head of European Private Equity at Blackstone, believes that “Armacell will continue to benefit from increasing trends such as global energy-efficiency”. Moreover, strong product innovation remains a key strength for the company.
As part of the deal, private equity funds managed by Blackstone, along with Denmark-based KIRKBI A/S, will shell out approximately $1.02 billion (960 million euros) for the buyout. Moreover, the transaction is expected to close in the first quarter of 2016, subject to regulatory approval. Notably, Lazard Ltd. and HSBC Holdings plc HSBC served as financial advisors for Blackstone.
We believe the company is poised to benefit from Armacell’s strong market position, attractive revenue growth history, and bright prospects. As of Sep 30, 2015, Blackstone’s Private Equity business had $91.5 billion in assets under management; while the company’s total dry powder stood at $84.9 billion as of the same date.
Blackstone currently carries a Zacks Rank #3 (Hold).
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