Gulf Oil arm Houghton International to combine with Quaker Chemical

The two companies have a combined experience of 250 years in metalworking and primary metals platforms around the world. “The joining of these two industry leaders will greatly benefit global customers, shareholders and employees of a stronger, more diversified and innovative company in the metalworking and metal industries,” said Ajay Hinduja, chairman of GOCL, in a press release on April 5, 2017.

Under the terms of the agreement, Houghton International shareholders will receive approximately 4.3 million shares of newly issued Quaker Chemical stock, representing 24.5 percent ownership of the combined company, and $172.5 million of cash. In addition, Quaker Chemical will assume Houghton International’s debt and cash, with net debt of approximately $690 million at year end 2016.

“We are pleased to enter a definitive agreement that unites these two distinguished and global companies in the metalworking and metals industries, by strengthening our capabilities and business models to better serve the global market and all our stakeholders. By combining resources, the new company will increase the breadth of its innovative technology, accelerate its product development initiatives, speed time to market, and diversify the long-term R&D pipeline,” said Sanjay Hinduja, chairman of Houghton International, which is owned by the Hinduja Group through its Gulf Oil Business.

Michael Barry, chairman, chief executive officer, and president of Quaker Chemical, added, “The proposed combination of Quaker Chemical and Houghton International represents the next phase of our transformation, and stays true to the vision of growing in our core specialties. Joining forces with Houghton International combines two highly complementary businesses, each having a long history of building tremendous expertise, technology and customer-centric cultures dedicated to delivering long-term sustainable value to customers, shareholders and associates. The new company will capitalize on best practices and expertise from both businesses.”

Combining Quaker Chemical’s and Houghton International’s product solutions and service offerings will allow the new company to better serve customers in the automotive, aerospace, heavy equipment, metals, mining, machinery, marine, offshore, and container industries.

The business will have one of the world’s most expansive metalworking platforms comprised of specialty products that include removal fluids, forming fluids, protecting fluids, heat treating fluids, industrial lubricants and greases. The expanded portfolio is expected to generate significant cross-selling opportunities and allow further expansion into growth markets that include India, Korea, Japan, and Mexico.

The company’s customer-intimate business model will be further strengthened with an expanded chemical management offering. The enhanced products and solutions portfolio, combined with industry-expert associates, will allow the combined company to bring additional value to its customers’ overall performance and operations.

For 2016, Houghton International had revenue of $767 million, $120 million of adjusted EBIDTA and a net debt of $690 million while Quaker Chemical had revenue of $747 million, $107 million of adjusted EBIDTA and $22 million of net cash during the same period. 

The combined entity estimates significant cost synergies of approximately $ 45 million, the majority of which will be realised within two years of closing. These synergies are expected to be driven primarily by supply efficiencies and cost reductions. Additional value creation is expected through cross-selling opportunities and the ability to provide an expanded array of products and solutions for customers.