Dorf Ketal in advanced talks to acquire Italy's Italmatch: Report

The privately held firm posted domestic revenue of Rs 5,479 crore in FY24 and reported Rs 2,961.3 crore for the six months to September 2024

Mumbai-based specialty chemicals major Dorf Ketal is in the final stages of acquiring Italy's Italmatch Chemicals SpA for about $1.6 billion, according to The Economic Times.

People familiar with the matter told the publication that both companies have entered deal exclusivity and aim to finalise a share purchase agreement within weeks, with an announcement likely by month-end. If completed, it would be Dorf Ketal's biggest acquisition to date, signalling the strong wave of consolidation sweeping the global specialty chemicals industry.

ET noted similar recent moves, including Abu Dhabi National Oil Co's €12-billion purchase of Covestro AG in 2024, Nippon Paint Holdings' acquisition of AOC from Lone Star last October, and JSW Paints' $1.6-billion buyout of Akzo Nobel's Indian business.

Founded in 1992 by first-generation entrepreneurs Subodh and Sudhir Menon, Dorf Ketal has built a leadership position in the hydrocarbons chemicals space, supplying solutions for oil and gas exploration, refining, petrochemicals, and downstream fuel retail.

The privately held firm posted domestic revenue of Rs 5,479 crore in FY24 and reported Rs 2,961.3 crore for the six months to September 2024, ET reported. The company recently withdrew its IPO prospectus, with sources telling The Economic Times the decision was linked to this transaction.

The proposed acquisition of Italmatch is aimed at expanding Dorf Ketal's portfolio into adjacent businesses, especially water treatment, and strengthening its global product range, ET said. Genoa-headquartered Italmatch, led by CEO Sergio Iorio, operates in four key segments: water and oil treatment; lubricants, flame retardants and plastic additives; performance products; and personal care. The firm has doubled down on specialty chemical additives for flame retardants, fabric softeners, lubricants, and water treatment, while building a strong US presence and running 20 manufacturing plants worldwide, including nine in the EU. Iorio is expected to roll over part of his stake to maintain leadership continuity, ET added.

Dorf Ketal has a long history of inorganic growth, having completed more than a dozen deals since 2003, as reported by The Economic Times. These include purchases from ExxonMobil, UOP, Clariant's North American land oil business, and local outfits such as Khyati Chemicals and Elixir Soltech.

Much of its R&D expertise and intellectual property has come via acquisitions, creating significant entry barriers for competitors. In FY24, the Menons also bid for Pune-based Aquapharm Chemicals to enhance their water-treatment offering, though that asset went to Phillips Carbon Black Ltd.

Italmatch, meanwhile, has been through several private equity transitions. Bain Capital acquired it from Ardian SAS in 2018 and later sold a minority stake to Saudi Arabia's Dussur, ET noted. Under Bain's stewardship, the company pursued organic growth and bolt-on deals, such as a majority stake in Brazilian water-treatment player Alcolina. As per The Economic Times, Italmatch reported FY24 revenue of €686 million, an 8% rise in volumes from the prior year, while adjusted EBITDA increased 17% to €134 million. The group also carries about €690 million in outstanding bonds, according to Bloomberg data cited by ET.

Analysts told The Economic Times that the deal could unlock synergies by optimising Italmatch's European manufacturing footprint and integrating it into Dorf Ketal's "wells-to-wheels" value chain, which spans everything from raw material extraction to end-use solutions. Dorf Ketal already operates plants in India, Brazil, and Canada, with contract manufacturing in the Netherlands, while its R&D hubs are in India, Brazil, Singapore, and Canada, supported by sales offices worldwide. Industry experts quoted by ET said specialty chemical transactions with EBITDA above $100 million usually trade at 10-14 times EV/EBITDA, though subdued market conditions in Europe could give buyers more leverage on pricing.

Citing The Economic Times, the global specialty chemicals market grew from $1.03 trillion in 2021 to $1.14 trillion in 2023 and is forecast to reach $1.43 trillion by 2028, driven by sectors like automotive, construction, electronics, pharmaceuticals, and food & beverages, with Europe remaining a key geography. Morgan Stanley is advising Dorf Ketal on the deal and underwriting the financing, according to ET.