Arsenal spin-out acquires nylon business

New York-based private equity firm SK Capital Partners is purchasing the nylon business of Solutia, a developer of specialty chemicals, fibers and fluids, for $50 million. 

The deal also gives Solutia a 2 percent equity stake in a new company that will be formed to hold the business’s assets.

Solutia will receive $4 million in deferred cash payments to be paid in annual $1 million installments beginning in 2011. An affiliate of SK Capital, which focuses on the chemical, material and health care sectors, will assume control over the nylon business’s management, employees and five manufacturing plants located throughout the southeast US.

The deal also includes a minimum level of working capital to be delivered once it is closed, which is about $100 million lower than the actual reported balance at the end of 2008 and $25 million lower than the expected balance at the end of the first quarter. SK Capital will also secure replacement of $25 million of letters of credit associated with the nylon business.

Solutia had been seeking a buyer for the nylon assets since last June, and expects the sale to close in the second quarter. It will use the proceeds to pay down its debt.

SK Capital, an affiliate of merchant bank The Valence Group, was formed in September 2007 by former Arsenal Capital co-founder Barry Siadat and former Signet Diagnostic president Jamshid Keynejad. It made its first purchase in April 2008, of Aristech Acrylics, and named Clark Winter its chief investment officer in December.