Chemtrade Dips a Toe in the Lube Industry


Canadian chemical supplier Chemtrade Logistics Income Fund this month acquired Peak Chemical LLC, one of two North American suppliers of a key component of popular antiwear additive and corrosion inhibitor ZDDP, and Peak Sulfur Inc., a supplier of regenerated sulfuric acid to the oil refining industry. The purchase price was U.S. $166.75 million, of which $21.75 million was for Peak Chemical and $145 million for Peak Sulfur.

Peak Chemical, headquartered in Lenexa, Kans., produces phosphorus pentasulfide, which is combined with zinc oxide to form ZDDP (zinc dialkyldithiophosphate). According to Chemtrades Aug. 11 Short Form Prospectus, Peak Chemicals capacity is about 20,000 short tons per year, while the other North American producer, Astaris LLC, has capacity of approximately 60,000 tons per year. Neither company is operating at full capacity, said Chemtrade, which estimated total North American demand at 55,000 tons per year.

Additive suppliers Lubrizol, Infineum and Afton Chemical are Peak Chemicals three largest customers. Its two largest customers each purchase about 7,000 tons per year.

Mark Davis, president and CEO of North York, Ontario-based Chemtrade, said, The acquisitions are within our core competencies of industrial chemicals, diversify our customer industries, and expand both our geographic reach and portfolio of products.

From a business model perspective, both businesses contain characteristics that mitigate typical commodity risks and produce sustainable stable earnings, he continued. Peak Chemical participates in a very consolidated producer market.

The acquisition of Peak Chemical provides entry into a highly concentrated producer market and diversifies Chemtrades business by adding a new chemical that is supplied to the lubricants industry, a market sector that Chemtrade has not previously served, the company said in an Aug. 2 announcement.

Peak Chemical, which reported sales of $9.4 million for the six months ended June 30, purchased its phosphorus pentasulfide business from FMC, the predecessor to Astaris, in 2000, when FMC was required to sell it by the Federal Trade Commission. The Peak Chemical plant, located in Lawrence, Kans., is on a site shared with and leased from Astaris, which is under a consent decree from the FTC to ensure that Astaris does not use its market position to control phosphorus pentasulfide pricing, according to the Chemtrade prospectus.

Peak Chemical receives its main raw material, elemental phosphorus, by pipeline from Astaris under a supply agreement, monitored by the FTC, that runs through 2014.

Chemtrade purchased the Peak businesses from a group of investment firms and individuals. Chemtrade is a publicly traded company that supplies industrial chemicals and services, including sulfuric acid, liquid sulfur dioxide and sodium hydrosulfite.

Related Topics

Market Topics