Bain Capital & Cinven to acquire Lonza Specialty Ingredients for $4.7bn

April 2021 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

April 2021 Issue

Bain Capital and Cinven have agreed to acquire Lonza Specialty Ingredients (LSI), a division of Lonza, in a deal worth $4.7bn. The transaction is expected to close in the second half of 2021, subject to customary closing conditions.

The unit, once Lonza’s mainstay before the ascendant drugs and biotech division saw it de-prioritised, saw revenue fall 2.1 percent last year to CHF1.7bn. The unit produces anti-dandruff ingredients, hygienic solutions for commercial launderers, disinfectants and more.

Lonza’s focus going forward will be its drug business, which has been boosted by the global efforts to fight the coronavirus (COVID-19) pandemic. Notably, Lonza’s major customers include Moderna, which the company supplies with ingredients for its COVID-19 vaccine, and AstraZeneca, which hired the company to help make its COVID-19 antibody treatment. Accordingly, Lonza’s drug, biotech and nutrition revenue rose 7.2 percent to CHF4.5bn in 2020, a 12 percent jump over its 2019 revenue. Lonza has also built four new production lines for Moderna’s vaccine against COVID-19 in the US and in Switzerland.

Headquartered in Basel, Switzerland, LSI has approximately 2800 employees, 11 research and development (R&D) centres and 17 manufacturing sites across the world. The business serves around 5300 customers across a wide range of end-markets.

To acquire the unit, the Bain-Cinven consortium beat competition from Lanxess and other private equity groups, including Advent and Carlyle.

“Today’s announcement is the result of a comprehensive and robust selection process,” said Albert M. Baehny, chairman of Lonza. “Bain Capital and Cinven have shown they understand the value of the experience and expertise of our Specialty Ingredients employees. They presented the most compelling industrial strategy and vision for the business, they are also keen to prioritize R&D and innovation, as well as to invest in existing facilities to unlock the potential of the business.”

He continued: “The sale of the Specialty Ingredients business will allow Lonza to focus on its position as a leading partner to the healthcare industry, and the free cash flows resulting from the sale will allow us to accelerate our strategic priorities. We look forward to continuing to collaborate with Bain Capital and Cinven to ensure a seamless transition for customers and employees.”

“Cinven and Bain Capital are delighted to invest in LSI, as a global leader in a specialty chemicals category that serves a critical need for society, across a broad range of end-markets,” said Pontus Pettersson, a partner at Cinven. “LSI enjoys a strong market position globally, underpinned by deep customer relationships, a continuous track record of innovation and product development, and extensive regulatory capabilities.”

“LSI has multiple attractive growth opportunities as the leading global player in the growing market for microbial control,” said David Danon, managing director at Bain Capital. “Our strategy is to reinforce the company’s market position, to accelerate growth through further investment in R&D and innovation, and to use LSI as a platform for further industry consolidation, in line with Bain Capital’s and Cinven’s strategies in other sectors.”

Lonza launched the sale process of LSI in September 2020, with the hope that the unit could be sold for around $3.25bn-$3.79bn. The company has also announced plans to sell a pair of French and Scottish manufacturing plants to British firm NextPharma. Both facilities produce lipid-oral dose drugs as liquid-filled hard capsules and softgels.

With news of the upcoming divestment, Lonza added that it was exiting the pharma market for both products, though it said it would continue to make Licaps-branded lipid capsule products for nutritional and consumer health customers. With these divestments, Lonza is en route to its stated goal of becoming a pure-play partner to the healthcare industry.

Richard Summerfield