Tyco sells plastics business

Putting the businesses on the block as early as 2002, Tyco International (Pembruke, Bermuda) has announced the sale of its plastics, adhesives, and coated products to private investment firm Apollo Management for $975 million. The conglomerate''s A&E Products Group, which includes garment hangers, wasn''t included in the sale but is expected to be offered up separately.

The sold unit is composed of 43 manufacturing sites in five countries and has 7100 employees, making trash bags, stretch film, plastic sheeting, and duct tape. Tyco estimates its 2005 revenue at $1.7 billion. In a June e-weekly, Tyco Communications VP Gwen Fisher told MPW that the unit has 21 processing facilities in the U.S., nearly half of its global footprint, which primarily handles film extrusion.

Thomas Blaige & Co. LLC (Chicago, IL) completed an analysis of Apollo''s purchase, including a comparison to other significant film transactions.

When Tyco originally offered Tyco Plastics, as well as the A&E Products hanger division, it sought to raise $3 to $4 billion. Assuming a value of $250 million for the smaller A&E Products, the midpoint value of $3.25 billion would have equated to 1.5x sales of $2.2 billion. When Tyco was unable to achieve its desired valuation, it took the division off the auction block, says the Blaige report.

In May 2005, Tyco once again announced that the Plastics and Adhesives business was for sale and hired Morgan Stanley as its advisor, with an implied asking price of $1.37 billion. The $975 million Apollo paid equates to the fourth largest film transaction since 1998.

Prior to this announced transaction, Apollo had invested in AEP Industries, a producer of packaging film. Apollo''s other recent investments in the plastics and chemicals sectors include a co-investment in Ondeo Nalco, the acquisition of Borden Chemical, and Eastman Chemical Co.''s coatings, adhesives, specialty polymers, and inks business. In May of 2005, Apollo merged these companies with Resolution Performance Products LLC, another portfolio company, to form Hexion Specialty Chemicals Inc. Also, in April 2005, Borden Chemical acquired Bakelite AG for $315 million.