Private equity group EQT Partners is in exclusive talks to buy Air Liquide’s hand sanitiser and disinfectant business, in a roughly €900m deal agreed as the company ramps up production to meet demand during the coronavirus pandemic.
The sale of Schülke, whose products range from alcohol-based hand rubs to hospital disinfectants and industrial cleaning products, is one of very few European buyouts to be struck in recent weeks. The coronavirus crisis has left dealmakers scrambling to shore up the companies they already own, while debt markets have dried up making financing harder to come by.
Schülke is experiencing a “short-term increase in demand [and] it is doing anything in its power to deliver as many products to the market as possible”, said Christian Sinding, chief executive of Stockholm-based EQT. While that will eventually slow down, he believes demand will continue to remain high in the future.
“I think the world has now learned that good sanitation, washing your hands and using hand sanitiser, those are the two main ways to combat the spread of germs and viruses,” said Mr Sinding. “We think this trend is going to be accelerated [in the] long term.”
Schülke was put up for sale by Air Liquide last year before the outbreak of the pandemic, and the French industrials group initially gave it a roughly €1bn price tag. However in the wake of coronavirus, Air Liquide had been seeking a premium, the Financial Times reported last month, reflecting what one person called the “coronavirus effect”.
An adviser to another bidder said that “nobody moved” when sellers asked them to raise their bid on the grounds that “there’s been a shift in the way people will use these products going forward”.
With adjustments, the company’s earnings were pegged at €75m, two people familiar with the matter said.
The deal comes at a time when the price of one of the main chemical ingredients for sanitisers — isopropyl alcohol, or IPA — has hit record highs in Europe, reflecting a surge in demand. Meanwhile, companies ranging from gin distilleries to high-end perfume makers have quickly converted production to help plug the shortage of alcohol-based gels, and chemicals group Ineos has ramped up capacity to turn raw materials into hand sanitiser.
Bids for Schülke had been due in late April, but EQT ended the process early by putting together a fully financed offer. It turned to HPS Investment Partners, the private credit investment company spun out of JPMorgan, to secure debt financing for the deal.
Since Schülke “is really busy working night and day to deliver its important products to the market . . . our strategy was to deliver something concrete and rapid,” said Mr Sinding. EQT is using “a higher proportion of equity than we would have one quarter ago,” he said. “In this marketplace you’re not looking to maximise leverage because that would be extremely expensive.”
Schülke is based in Norderstedt, near Hamburg. It has an annual turnover of about €335m and employs more than 1,250 people worldwide, according to its website. Air Liquide said in a statement that the sale illustrated the group’s strategy to “focus on its core gases and healthcare businesses” and said the deal would support its “next phase of growth and its innovation development”.
The sale is subject to final agreement and regulatory approval.
Additional reporting by David Keohane in Paris and Robert Smith in London