DSM Tries Again To Sell Special Products Unit

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Sodium and potassium benzoate are widely used as food preservatives.

DSM is trying again to sell its DSM Special Products business, a producer of benzoic acid and derivatives that the company tried, but failed, to sell two years ago.

The planned sale, revealed in the Dutch firm's second-quarter earnings report, is to Emerald Performance Materials, a chemical maker owned by an affiliate of Sun Capital Partners. Established in 2006, Emerald is the former food ingredients and industrial specialties business of Lubrizol.

DSM Special Products' main site is in Rotterdam, the Netherlands, where it owns the world's largest plant for oxidizing toluene into benzoic acid, a starting point for the fine chemical benzaldehyde and the food preservatives sodium and potassium benzoate. It has annual sales of roughly $150 million.

In early 2008, DSM announced that it was selling the business to the private equity firm Arsenal Capital Partners. At the time, however, Arsenal owned Velsicol Chemical, which operates benzoic acid plants in the U.S. and Estonia. Contending that the combination would create a monopoly in Europe, antitrust regulators at the European Commission said it would clear the deal only if Arsenal agreed to sell the Estonian plant. The companies later called the sale off, saying the requirement was too onerous.

A sale to Emerald would similarly combine two benzoic acid producers, but this time on different continents. Emerald calls its facility in Kalama, Wash., the largest U.S. benzoic acid producer. Like the Rotterdam plant, the Kalama facility manufactures benzoic acid derivatives such as benzaldehyde and benzoate food preservatives. Although DSM's earnings report doesn't address potential antitrust issues specifically, it does acknowledge that the deal requires regulatory approval.

For DSM, a successful sale would continue its exit of basic chemical businesses that are unrelated to its core life and materials sciences operations. In April, the company announced the sale of its melamine and fertilizer businesses to an Egyptian firm. Other businesses in its base chemicals division—which produces elastomers, citric acid, and maleic anhydride—are in the process of being sold as well, the company says.

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