Sun Capital in 20x exit to One Equity

Sun Capital Partners has sold speciality chemicals company Sonneborn following a busy first quarter in which it sealed a number of sizeable exits.

Sun Capital Partners has sold speciality chemicals company Sonneborn to One Equity Partners, generating a substantial 20x return multiple, according to an industry source.

Sonneborn produces white oils, waxes and other hydrocarbon specialty products. Sun purchased the company in a 2005 carve-out transaction, using capital from both its $500 million, 2003-vintage third fund and its 2005-vintage $1.5 billion fourth fund.

After investing in Sonneborn, Sun improved the company’s procurement and sourcing methods of raw materials by terminating an unfavourable supply agreement.

“We moved to a ‘spot market’ purchasing strategy so that we could basically buy from anywhere and just get the best market price,” Sun vice president Jeremy Stone told Private Equity International. Sun also reduced the company’s product offering to focus on the most profitable products, Stone said.

Sun also completed an add-on acquisition in 2010, purchasing two product lines from chemical manufacturer Chemtura in a bankruptcy sale. 

Sun took Sonneborn to market once before in 2010, but decided to hold the business for a longer period. After bringing the company to market a second time, Sun found a “very good exit environment” according to Stone.

“The credit markets were good and a lot of companies were familiar with this asset…and this is in a market of rising raw material costs, which makes the story more impressive because it really validates our story about improving our procurement.” 

Sonneborn’s sales increased by more than 50 percent and revenue grew by four times during the 12-month period ending 30 December 2011, according to Sun.

Lazard acted as financial advisor to Sun on the sale. Macquarie Capital acted as financial advisor to One Equity Partners.

Sun Capital Partners is coming off a “robust” first quarter of 2012, Stone said.  Last month, the firm agreed to sell automotive transmission product-maker Raybestos Powertrain to Monomoy Capital Partners. Financial terms were not disclosed, but an industry source said the deal generated a 110x return multiple for Sun.

In January, the firm agreed to sell its majority stake in canned fruit and vegetables company Del Monte Canada to ConAgra Foods, sealing a 40x return, according to an industry source.

“This is shaping up to be one of our best quarters on all fronts,” Stone said.

An in-depth interview with Sun European Partners' Michael Kalb appears in this month's PEI.