Swiss chemicals company Sika AG has agreed to buy French rival Parex in a 2.5bn Swiss franc ($2.55bn) deal, its biggest acquisition as it seeks to step up consolidation in the building materials market.
Sika, itself until recently a takeover target for France’s Saint-Gobain, said it was buying Parex from a fund owned by CVC Capital Partners to increase it presence in the mortar and waterproofing businesses.
Parex generated core profit of around 195mn Swiss francs from sales of 1.2bn francs in 2018.
“Parex is an excellent company with well recognised brands and an impressive performance track record. The businesses of Parex and Sika are highly complementary,” said Sika chief executive Paul Schuler.
“Using Parex technologies as a growth platform in all our 101 countries and cross-selling of our products to the well established distribution channels of Parex will generate great profitable growth.”
Sika shares fell more than 2% in early trading.
Sika said the purchase will boost its share of the global construction chemicals market, which is estimated to be worth around 70bn Swiss francs per year.
The Swiss company has been on the hunt for large acquisitions since it saw off a hostile takeover approach from Saint-Gobain last year.
It is also seeking to bulk up so it does not become a takeover target itself, with Chairman Paul Haelg last year telling Reuters that it was on the lookout for bigger deals.
“We will be more dynamic and set a higher priority on acquisitions. We want to be a consolidator in our industry,” Haelg said in June.
The Parex deal is set to add to earnings per share starting the first full year after closing, expected by the third quarter of 2019.
The acquisition is likely to generate annual synergies of 80-100mn francs, Sika said.
In October, CVC engaged investment bank Lazard to find a buyer for Parex, attracting interest from Chinese and Western construction materials groups.
Analyst Bernd Pomrehn, an analyst at Bank Vontobel in Zurich, said Sika was a logical buyer for Parex, given their very similar margins and growth record.
“This is a good deal and the price is lower than rumoured last year. This will not stop Sika’s growth ambitions,” he said.
The 2.5bn figure refers to Parex’s enterprise value.
Sika also reported higher full-year sales of 7.09bn Swiss francs for 2018, beating its target of achieving 7bn francs for the first time.
For this year, Sika expects sales growth of 6-8%, in line with its strategic targets, fuelled by new factories and acquisitions.
It expects an “over-proportional” rise in profit.
Depending on the closing date of the Parex deal, Sika said it expected sales to exceed 8bn Swiss francs.
The company, which is due to report full-year earnings on February 22, said it expected 2018 operating profit in the range of 940-960mn francs.