The Urethane Blog

The Pendulum Swings Back

Covestro to sell European Systems Houses
business to H.I.G. Capital

 Sales proceeds in the high-double-digit euro million range
 Systems houses with revenues of EUR 230 million
 Covestro to remain a key supplier to European Systems Houses
 New ownership allows unit to further grow and to position itself as
an independent player

Covestro has signed an agreement with H.I.G. Capital (“H.I.G.”) for the sale of
Covestro’s European Systems Houses business. H.I.G. focuses on investments in small and mid-sized companies. The sales proceeds amount to a high-
double-digit euro million sum. The decision to sell the systems houses was taken as part of Covestro’s ongoing portfolio optimization process that includes
the sale of Covestro’s North American spray polyurethane foam systems house
in 2017.

“Our focus is future growth and value creation. That’s why evaluating and
optimizing our portfolio is part of our daily business”, said CFO Dr Thomas
Toepfer. “Providing tailor-made solutions, systems houses serve relevant market
needs. However, in an advanced polyurethanes market like Europe we focus on
a more centralized approach to efficiently address the needs of our customers.”
With its new owner H.I.G., the European Systems Houses now have the

perspective to position themselves as an independent, focused player for mid-
sized customers. In Asia with its developing polyurethane markets, Covestro will

continue to serve its customers through its established systems houses network.
The systems houses are part of the company’s Polyurethanes segment and are
offering tailor-made polyurethanes systems for customers. The European Systems Houses business comprises facilities in the Netherlands, Denmark,
Spain, Germany and further businesses in Italy. Approximately 250 employees
are generating annual sales of some EUR 230 million. Operations will continue
at the current facilities while Covestro will continue to have strong ties with the
systems houses as a key polyurethanes supplier.

Polyurethanes are a class of plastics that can be found in many areas of modern
life – be it in the form of soft or rigid foam or as thermoplastic polyurethane
(TPU). They are used in numerous applications like, for instance, mattresses,
automobile seats, sports equipment or as insulating material in buildings and
refrigerators.

With view on scale and capabilities as well as the solid asset base, the
European Systems Houses perfectly fits into H.I.G.’s buy-and-build approach.
H.I.G. aims to further develop their pan-European presence and to build a
strong and independent European group of polyurethane systems houses with a
clear focus on mid-sized customers. The company intends to continue working
with the current experienced management team of the systems houses to
further improve the business. The closing of the transaction is expected for the
second half of 2019 after the required antitrust clearance.

About H.I.G. Capital
H.I.G. is a leading global private equity and alternative assets investment firm
with over €26 billion of equity capital under management. Based in Miami, and
with offices in New York, Boston, Chicago, Dallas, Los Angeles, San Francisco,
and Atlanta in the U.S., as well as international affiliate offices in London,
Hamburg, Madrid, Milan, Paris, Bogotá, Rio de Janeiro and São Paulo, H.I.G.
specializes in providing both debt and equity capital to small and mid-sized
companies, utilizing a flexible and operationally focused / value-added
approach:
1. H.I.G.’s equity funds invest in management buyouts, recapitalizations
and corporate carve-outs of both profitable as well as underperforming
manufacturing and service businesses.
2. H.I.G.’s debt funds invest in senior, unitranche and junior debt financing
to companies across the size spectrum, both on a primary (direct
origination) basis, as well as in the secondary markets. H.I.G. is also a
leading CLO manager, through its WhiteHorse family of vehicles, and
manages a publicly traded BDC, WhiteHorse Finance.
3. H.I.G.’s real estate funds invest in value-added properties, which can
benefit from improved asset management practices.

Since its founding in 1993, H.I.G. has invested in and managed more than 300
companies worldwide. The firm’s current portfolio includes more than 100
companies with combined sales in excess of €28 billion. For more information,
please refer to the H.I.G. website at www.higcapital.com.