Keppel Infrastructure Trust to buy Australian chemical firm Ixom for $775m

It will allow Keppel to gain a foothold in the water treatment sector.

Keppel Infrastructure Trust (KIT) will acquire Australian chemical firm Ixom HoldCo for $775m (A$777m), an announcement revealed.

Keppel Infrastructure Fund Management's (KIFM) wholly owned subsidiary will be taking the chemicals supplier off the hands of management sellers and funds managed by Blackstone Group, which paid $751.43m (A$750m) for the business in 2014.

Ixom, with its subsidiaries Ixom Group, supplies and distributes water treatment chemicals which are key to fundamental industries, as well as industrial and specialty chemicals, KIT said. Its facilities are located throughout regions in Australia and New Zealand, with dedicated third party bulk tankers in select regions.

“The chemicals that Ixom manufactures and distributes are needed for daily life and many business,” KIFM CEO Matthew Pollard said. “It is also a sector we are familiar with given that KIT, in its capacity as owner and operator, uses many of the major chemicals in our water desalination and wastewater treatment assets that are similar to those manufactured and distributed by Ixom.”

Ixom’s DPU for Q3 2018 stood at $0.372 and will remain unchanged, the announcement added. For illustrative purposes, Ixom's DPU would have dipped to $0.345 if the fund-raising was done with a rights issue.

“The proposed distribution per unit (DPU) yield accretive acquisition of Ixom is strategic for KIT, allowing the trust to gain a foothold in this stable sector of water treatment as well as industrial and specialty chemicals distribution,” Pollard said.

The chemicals supplier will provide the trust with stable cashflows underpinned by multiple core infrastructure assets and a large customer base comprising including blue-chip companies and municipalities, Pollard added.

Ixom’s earnings before interest, taxes, depreciation and amortisation (EBITDA) for the nine month period ended 30 June was $93m (A$93m), whilst net profit stood at $33m (A$33m), the announcement also revealed.

It will initially be funded via a bridge facility of up to $750m (A$752m) and through a five-year senior secured debt funding, known as a term loan, of $531m (A$532m). The term loan will be used to repay an existing Ixom Group loan of $431m (A$432m) and the balance will be used to pay a portion of the purchase price.

The acquisition is expected to be completed in Q1 2019. Upon completion, KIT’s enlarged portfolio will grow from $3.8b to $5.1b, the firm said in a statement.