(Adds deal price, Gupta remarks) A year after he sold Rohm and Haas to Dow Chemical on orders from the Haas family and other leading shareholders, Raj Gupta, Rohm's last CEO, is advising New Mountain Capital, an $8.5 billion-asset New York private equity firm, as it reorganizes Mallinckrodt Baker Inc. (MBI)
New Mountain has agreed to buy MBI, a Phillipsburg, NJ pharma and electronic chemical-materials maker, from previous owner Covidien, for $280 million, all cash. Covidien says fiscal 2009 sales for Mallinckrodt Baker totalled $414 million. The company makes materials for solar panels, computer chips, and the stuff that dissolves in your gut when you swallow pills. MBI has 1,000 employees and plants in Kentucky, Mexico, Holland, plus contract manufacturers in Asia.
"For over a year, New Mountain has been working closely with Raj Gupta and other industry executives to find a (company) to build into a leader in high-growth, high-value-added niches of the special chemical and materials business," said Gupta's boss, New Mountain CEO Steve Klinsky, in a statement.
Mallinckrodt Baker "can be positioned as a leading global player in the pharmaceutical, laboratory and electronic segments of the speciality chemicals and materials business," Gupta said in the same statement. Gupta left Rohm with what my colleague Bob Fernandez reported was a total of $102 million in stock, severance and retirement, a respectable nest egg for entering the private-equity business.
UPDATE: Gupta speaks: "When I retired from Rohm and Haas in April 2009 I made a conscious decision not to join the boards of any of the chemical materials companies; I approached the private equity companies. I went with New Mountain," he told me. "They're invested in 17 or 18 companies since Steve founded it" in the 1990s. "They still have interests in about 14.
"They take a ten-year view. The first five years is investing in a very conservative financial structure. In this transaction we have no third-party debt."
BMI "serves three very attractive markets: pharmaceutical intermediates; lab supplies; process chemicals for the electronics industry. They have... a pretty good global presence. We see this as a great platform for New Mountain to build a larger business. With the right management team, this business has a lot of opportunities for growth.. We'll make organic investments, geographically expanding the portfolio, and looking for some tuck-in acquisitions, between $50 and $100 million, in related markets."
Covidien is the healthcare equipment company spun off by Tyco International, where Gupta is a director (he's also on the board of Vanguard Group, Hewlett-Packard, Delphi Automotive). "This was a business they acquired when they were spun off by Tyco. They've been trying to sell it for the last couple of years."