Sealed Air to sell Diversey Care to Bain Capital for $3.2bn

May 2017 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

Following weeks of speculation, packaging manufacturer Sealed Air has agreed to sell its Diversey Care unit, as well as the food hygiene and cleaning business within its food care division, to private equity giant Bain Capital, in a deal worth around $3.2bn.

In a statement regarding the deal, the two parties announced that the newly merged unit will be called New Diversey. The sale of Diversey Care is expected to close in the second half of 2017, and is subject to certain regulatory approvals, as well as the customary closing conditions. The acquisition includes a formal offer to acquire certain elements of Diversey’s business in France and the Netherlands, which may be accepted following Works Council consultation.

The deal will not adversely affect New Diversey’s workforce, Sealed Air announced that New Diversey will continue to employ around 8600 people worldwide in a business which generated net sales of around $2.6bn in 2016. According to Sealed Air, however, the Diversey Care business has been weighed down of late by a strong dollar and a slowdown in some of its end-markets. Regardless of this slowdown, the unit still represents an important investment for Bain and will be led by Dr Ilham Kadri, current president of the Diversey Care division.

“Diversey has a long track record of leadership in the hygiene and cleaning solutions market on a global basis,” said Ken Hanau, a managing director at Bain Capital Private Equity. “We are excited to partner with the talented team at Diversey to grow across key market verticals and geographies while investing in innovative hygiene solutions. Bain Capital’s integrated global platform and strong growth orientation are well aligned with the strategic vision for Diversey.”

According to the statement, “New Diversey will be a leading hygiene and cleaning solutions company that integrates chemicals, floor care machines, tools and equipment, with a wide range of technology based value-added services, food safety services along with water and energy management”.

Charlotte, North Carolina-based Sealed Air said that it would use the proceeds of the sale to repay debt, repurchase shares, maintain its net leverage ratio in the range of 3.5-4.0 times and fund core growth initiatives. In light of the sale, Sealed Air’s board has authorised an increase of the company’s share repurchase programme; the company will be repurchasing another $1.5bn worth of Sealed Air common stock. With this increase, the total authorisation for future repurchases under the programme is now approximately $2.2bn. Sealed Air’s board has also announced that the company will maintain its quarterly cash dividend of $0.16 per common share while it reduces earnings dilution.

Once the deal has closed, it will allow Sealed Air to refocus its efforts on its food, product and medical packaging businesses, the company noted. The sale of the Diversey Care unit has been on the table for some time. In October 2016, the company announced plans to spin off Diversey Care and other related businesses. Rumours of Bain’s interest have circulated since mid-March.

“We are pleased that New Diversey has a strong partner to support future growth initiatives and drive further expansion,” said Jerome A. Peribere, president and chief executive of Sealed Air. “New Sealed Air, a leading provider of food, product and medical packaging solutions, will continue to focus on accelerating profitable growth and generating strong cash flow through end market opportunities and the global adoption of new products and solutions. Sealed Air’s advanced product portfolio is designed to reduce waste, conserve resources and provide product security, and deliver unique and measurable value to customers and the planet.”

Sealed Air acquired Diversey in 2011 from its controlling shareholders, the Johnson family and private equity firm Clayton, Dubilier & Rice LLC, in a $4.3bn cash-and-stock deal.

Richard Summerfield