Industrial acid producer Chemtrade Logistics Income Fund (TSX:CHE.UN) has signed a deal to buy pollution cleanup company Marsulex Inc. for about $419.5 million.
Chemtrade president and chief executive Mark Davis said the deal will diversify his company's product portfolio, customer base and industry concentration.
"It expands our business into several attractive new end markets and importantly will enable us to logistically integrate the products and services of both companies," he told a conference call after markets closed Thursday.
Davis said Marsulex gives Chemtrade a significant presence in Western Canada.
"It diversifies our customer base and expands both our product portfolio and geographic mix," he said.
The sale does not include Marsulex Environmental Technologies Corp. which provides services to electric utilities, petrochemical and industrial customers to help control air pollution.
Under the deal, Marsulex (TSX:MLX) shareholders will have the option to receive either $13.80 or $10.50 in cash plus a share of Investis U.S. Inc. which will own Marsulex Environmental Technologies.
Marsulex shares, which were halted pending the announcement of the deal, were up 15 cents at $14 on the Toronto Stock Exchange, while Chemtrade units were down 14 cents at $14.04.
The deal has received the approval of the Marsulex board of directors.
"We believe this transaction provides the best alternative for Marsulex shareholders to receive attractive value and liquidity for their shares," Marsulex CEO Laurie Tugman.
The deal will require approval by two-thirds of the votes cast at a Marsulex shareholder meeting.
Marsulex's largest shareholder, Birch Hill Equity Partners Management Inc., has agreed to vote its roughly 60 per cent stake in the company in favour of the deal.
Chemtrade said it expects to find $10 million in annual savings when the two companies are combined through the elimination of management fees, salaries, duplicative public company costs and other costs.
To help pay for the deal, Chemtrade said it has signed a deal to raise $130 million in an equity financing.
Chemtrade will issue 9.56 million subscription receipts at a price of $13.60 per receipt, which will be exchanged for shares once the deal closes.
The underwriters have also been granted an over-allotment option for an additional 1.43 million receipts that would raise an additional 19.5 million.
Chemtrade has also signed a deal for a $380 million four-year term loan and an $80-million revolving credit facility that will replace its existing senior revolving credit facility.
Marsulex is a provider of industrial services and a producer of sulphur-based industrial and water treatment chemicals
Chemtrade supplies sulphuric acid, liquid sulphur dioxide and sodium hydrosulphite to industrial, textile, chemical and other sectors, and also processes spent acid.
