Salt Union
Transaction Background
In 1992 Graphite led the £39 million management buy-in of the rock salt and white salt businesses of ICI. The former was the largest provider of rock salt for the de-icing of roads in the UK. The latter was the second largest provider of white salt used in water softening, chloralkali products and animal feeds. The buy-in team worked alongside the incumbent management to prepare the company for its separation from ICI prior to completion.
Deal Attractions
The buy-in team had managed similar businesses in the US and had formulated a detailed plan to reduce costs and increase efficiency. The rock salt business had a near monopoly in certain parts of England and there was scope to increase prices. The white salt business was strongly cash generative and offset the weather dependency of the rock salt business. Relatively high levels of debt could be used because Salt Union was able to take out insurance against warm winters.
Achievements
- the business was successfully established as an independent company
- profitability improved substantially in the two years following the buy-in
- productivity improvements, overhead reductions and price increases all exceeded targets
- operating profit increased by 125 per cent to £14.1 million in the three years following the buy-in
Exit
- all of the senior debt was repaid within three years
- the company was sold in 1995 for £82 million to a US chemicals group
- Graphite achieved a multiple of 5.2 times the cost of its initial investment
