Arizona Chemical Exits IP’s Pages

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Memphis, Tenn.-based International Paper announced on Dec. 19 it will sell its Arizona Chemical business – whose oleochemicals products are used in synthetic lubricants, grease and metalworking fluids, among other areas – to Rhone Capital III L.P. for $485 million.

Arizona Chemical has been in the pine derivatives business for more than 75 years. Headquartered in Jacksonville, Fla., the company supplies pine chemicals to the adhesives, inks and coatings, and oleochemicals markets. Its oleochemicals include esters for making synthetic lubricants, distilled tall oils used in metalworking fluids, castor derivatives used in lithium greases and fatty acids used in many lubricants. International Paper originally put the business unit on the block in June 2005, vowing it would sell or spin off the operation in 2006.

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Arizona Chemical has 11 manufacturing facilities worldwide, located in Panama City, Pensacola and Port St. Joe, Fla.; Savannah and Valdosta, Ga.; Dover, Ohio; Bedlington and Chester-le-Street, England; Niort, France; Oulu, Finland; and Sandarne, Sweden. It also has research and development capabilities and a network of sales offices throughout the world, including a research laboratory and European headquarters in Almere, Netherlands, as well as a research laboratory in Savannah, Ga. The company employs almost 1,500, and hadrevenues of about $700 million in 2005.

As part of the transaction, International Paper will acquire a minority interest of 10 percent in the acquisition vehicle that Rhone Capital will form. The transaction is subject to adjustments and conditions at closing.

Rhone Capital specializes in mid-market leveraged buyouts, recapitalizations and partnerships with focus on European and trans-Atlantic investments. Rhones third private equity fund will invest in the acquisition of Arizona Chemical. Rhone has offices in London, Paris and New York.

International Paper said the sale of Arizona Chemical is part of its continued efforts to transform its operations to focus on its global uncoated papers and packaging businesses, as well as xpedex, a North American merchant distribution system.