Germany’s Evonik Industries AG (EVKn.DE) will buy the specialty and coating additives operations of U.S. industrial gas producer Air Products and Chemicals Inc (APD.N) for $3.8 billion.
Evonik has been trying since 2014 to make a big acquisition to bolster growth and reduce dependence on its volatile animal feed ingredients business.
The businesses Evonik is buying, with about $1 billion in sales, are part of a division Air Products had earmarked for a separate listing.
Air Products said it would still list the rest of the division – Material Technologies – under a new name, Versum Materials.
The Evonik deal values the two units at 15.2 times expected 2016 earnings before interest, taxes, depreciation and amortization (EBITDA), Evonik said in presentation slides on Friday.
That is far above Evonik’s own trading multiple of 6.3 including debt, according to Thomson Reuters. Evonik said once savings and tax benefits were included, it was paying 9.9 times the assets’ earnings.
Feed ingredients, sulfur-containing amino acids mainly used for poultry, provided an earnings boost last year as prices rose due to an unexpected shortfall in rivals’ output, but prices are expected to decline this year.
With its acquisitions, Evonik will be adding ingredients for insulation foams, sun lotion and paint as well as additives to harden aircraft and marine coatings.