Pitch Best Mid Cap Deal 2023: Ebert Hera acquires Sitech Services

Stem op deze deal via de stempagina: Mena.nl/genomineerden-best-mid-cap-deal-2023

Name of the deal: The acquisition of Sitech Services by Ebert Hera
Date announced: 19-1-2023
Date closed: 1-6-2023
Published value: € >50 million
Buyer(s): Ebert HERA Esser Group
Target: Sitech Services B.V. (carve-out entity providing site services, fire brigade and IT services at Chemelot)
Seller: AnQore, Arlanxeo, Borealis, DSM, Fibrant and OCI

Involved firms and advisors

Involved firms and advisors buy side:
Legal advisor: Dirkzwager
FDD: KPMG 

Involved firms and advisors target:
Tax advisor: Deloitte

Involved firms and advisors sell side:
Financial advisor: AXECO
Legal advisor: Rutgers & Posch
Financial DD advisor: Alvarez & Marsal

Pitch
Sitech Services, the company responsible for the maintenance and modernisation of the chemical plants at Chemelot, is being split into two independent businesses — a service division and an asset division. Once independent (subject to the advice of the works councils and the approval of competition regulators) the service division will be taken over by a German industry peer, the Ebert HERA Esser Group. This is good news for both parties as it will allow them to combine their knowledge, expertise and the outstanding potential of their technical personnel, and ensure that they are all deployed in the best possible way to take on the current challenges in the chemical industry. A new partner is also being sought for the asset division.

Brief description deal / Deal outline:
Around 2008, multinational company DSM developed a strategy to divest a number of its chemical plants located at the Chemelot site in Limburg. During this time, DSM established Sitech Services, offering maintenance, repair, modernization, site infrastructure, and fire brigade services to the plants on the Chemelot site. Along with the disposal of the DSM assets, shares in Sitech were transferred to each of the new major site entrants (AnQore, Arlanxeo, Borealis, Fibrant, and OCI).

Since then, Sitech Services acted as a shared service center for the Chemelot players, on non-commercial terms. This situation, whereby the company’s shareholders were also its clients, created a complex structure. Approximately four years ago, the site users determined that this set-up was outdated and no longer desirable.

Sitech’s shareholders decided that the service, maintenance, and fire brigade activities needed to be split up from the infrastructure-related activities and subsequently sold to a new shareholder that could operate the resulting service company in a commercial manner. This process, which was prepared over a period of four years, entailed a legal carve-out, a new organizational set-up, including labor contracts and pensions, new commercial service level agreements and work guarantees with the selling shareholders, and the creation of carve-out financials.

The impact of this transaction for the six selling shareholders was major, as a non-functioning Sitech Services could result in significant operational issues (e.g., plant shutdowns) with major financial consequences, while a commercially operating company would likely result in better and more competitive services.

A competitive process with strategic parties was run, which ultimately resulted in the acquisition of the company by Ebert HERA, a German family-owned engineering company familiar with the site and its players.

Why Should This Deal Win the Award for Best Deal Small-Cap 2023?
This transaction is unique for several reasons:

1. i. Important Strategic Nature: Sitech Services is crucial for the functioning of the Chemelot site and all of its players, as it performs maintenance for major site players, including AnQore, Arlanxeo, Borealis, DSM, Fibrant, and OCI. Sitech Services also provides fire brigade and IT services for the entire site. With approximately 850 employees, the company is an important employer in the Limburg region.
2. Complex Carve-out: Sitech Services provided both service activities (maintenance, engineering projects, fire brigade, IT services) and management of the site’s infrastructure (utilities, wastewater, and logistics). The shareholders decided that both needed to split up and be sold separately to ensure the optimal strategic fit for both activities. This process ultimately took four years to fully prepare and entailed a legal carve-out, new organizational set-up, and the creation of carve-out financials.
3. Seven Parallel Negotiation Tracks: Each of the shareholders was both a seller in the process and acted as a future customer aiming to optimize its future commercial terms. None of the sellers had the same economic interests, nor were their shareholdings aligned with their operational or commercial relation with Sitech. As a result, negotiation of service level agreements (SLAs) between Sitech and its six former shareholders transpired in parallel with creating the carve-out financials and negotiating the deal terms and documentation.

Negotiations also included key non-financial topics, among which safeguards that personnel would remain with Sitech for the long term, as these engineers possess highly specific operational knowledge of the site plants. Some of the sellers had short decision cycles with Dutch headquarters, while others had to go back to their international parent companies for approvals.

Aside from these seven parties, the Dutch unions and the works council also played an instrumental role and were closely involved during the whole process.

Deal rationale:
Historically, Sitech has been run as a cost center with limited commercial incentives, adversely impacting its operational and economic effectiveness. The partnership with Ebert HERA, combined with new commercial agreements with the sellers, will significantly enhance the operational effectiveness of Sitech Services and offers both parties the opportunity to grow together as a leading service provider working to ensure a sustainable, safe, and competitive process industry. Ebert HERA will also make it easier to achieve expansion of the services offered at Chemelot and ambitions for growth outside of Chemelot.

What is the impact of this deal for the company?
The carve-out and subsequent transactions have resulted in Sitech Services becoming a stand-alone independent company with a commercial set-up. Ebert HERA will significantly enhance the operational effectiveness of Sitech and will provide opportunities both on and off Chemelot, ensuring a healthy future and safeguarding employment.

What is the impact of this deal for the direct stakeholders?

1. Customers / Sellers: Sellers have given up their control on the services that have a huge operational and potential economic impact for them. They are now Sitech’s customers under terms that are significantly more commercial.
2. Management & Employees: Ebert HERA has committed to supporting Sitech Services for the long term, maintaining its unique multidisciplinary service approach and the approximately 850 Sitech employees and home base at the Chemelot site.
3. Society and Environment: The deal impacts society and the environment by ensuring the continuity of critical services required to maximize performance and create a sustainable, safe, and competitive process industry.

What is the impact of this deal on society?
The deal ensures the continuity of critical services required to maintain optimal production while transitioning towards sustainability in the European process industry.

What was most complex about this deal?
The complexity of this deal can be summarized as follows:

• An important strategic nature.
• A complex carve-out process.
• Seven parallel negotiation tracks with each of the six sellers and the purchaser, with varying economic interests.
• Negotiating servicelevel agreements (SLAs) impacted carve-out financials and the economics for the buyer.
• Negotiations included key non-financial topics related to personnel.
• Involvement of multiple parties, including Dutch unions and the works council.
• Managing the process within the targeted timeline.