Flotek Industries, Inc. announced it has entered into a definitive agreement to sell Florida Chemical Company, LLC, its Consumer and Industrial Chemistry Technologies segment, to Archer Daniels Midland Company (“ADM”) for total consideration of $175 million in cash, subject to post-closing working capital and other adjustments. With this transaction, Flotek has established itself as a leading specialty chemistry provider of custom, full-fluid solutions to the upstream oil and gas industry. Flotek will retain all of its patents.
In connection with the sale of FCC, Flotek and ADM have entered into long-term reciprocal supply agreements. The first will secure Flotek’s long-term supply of d-limonene. Additionally, Flotek will manufacture differentiated chemistries for Florida Chemical’s industrial customers. Finally, the companies will explore opportunities to jointly develop next-generation chemistry technologies for the oil and gas and agricultural industries.
The closing of the transaction is expected during the first quarter of 2019 and is subject to customary closing conditions, including obtaining necessary approval related to the Hart-Scott-Rodino Act. Flotek anticipates that the transaction will have a negligible cash tax effect, as the gain on this sale should be substantially offset by the Company’s outstanding net operating losses.
John Chisholm, Flotek’s Chairman, President and Chief Executive Officer, commented, “We believe the benefits of this transaction are extremely compelling on multiple fronts and in the best interest of our stakeholders. This transaction unlocks significant value for our stakeholders, while maintaining our access to key raw materials for our Energy Chemistry Technologies ("ECT") business. The transaction also enhances our flexibility to evaluate and pursue the long-term strategy for our core ECT business. Additionally, we are very excited about our long-term relationship with ADM to develop unique opportunities to more fully leverage their vast, high-performing portfolio of to better serve the oil and gas market for many years to come. This transaction has created a synergistic relationship that brings strategic benefits to each company and our stakeholders.”
Vince Macciocchi, President of ADM’s Nutrition business unit, commented, “ADM is already a leader in natural flavors for food and beverages, offering a wide variety of high-value products and solutions in areas such as vanilla and mint, and this acquisition will place us in a leadership position for citrus flavors as well. Citrus is one of the fastest-growing flavor categories, and the single most important taste profile for beverages, and no one in North America does citrus better than Florida Chemical Company.”
In 2013, Flotek acquired Florida Chemical to vertically integrate its supply of citrus oils, a key raw material in its patented Complex nano-Fluid® (“CnF®”) suite of technologies. Since the original acquisition, the Company’s Energy Chemistry Technologies segment has benefitted from FCC, which enabled Flotek to better manage feedstock costs through the energy downturn from 2014 to 2016, pursue a new go-to-market strategy, and mitigate raw material price inflation caused by citrus greening disease and a significantly limited supply of global citrus oils. Simultaneously, Florida Chemical has expanded its client base and product offerings, while enhancing its processing and distillation capabilities and leveraging its world-class supply chain and highly respected employee base to penetrate into food and beverage applications. This divestiture is the natural next step in Flotek’s evolution, capturing the value of FCC while securing the supply of feedstock required to create the Company’s patented chemistries.
“ADM is a world-class leader in transforming crops into agricultural and food products. Recognized for its industry-leading capabilities and assets, Florida Chemical will be a significant strategic addition to ADM as they further expand their industry-leading flavor and fragrance offerings. We thank the Florida Chemical team for their invaluable contributions and look forward to continuing our strong relationship moving forward,” said Chisholm.
About Florida Chemical Company, LLC
Founded in 1942, Florida Chemical designs and delivers high-quality products that meet the demands of a variety of consumer and industrial applications, including food and beverage, fragrance, and household and industrial cleaning products. Sourcing citrus oil domestically and internationally, it is one of the largest processors in the world.
About Flotek Industries, Inc.
Flotek develops and delivers prescriptive, reservoir-centric chemistry technologies to oil and gas clients designed to address every challenge in the lifecycle of the reservoir and maximize recovery in both new and mature fields. Flotek's inspired chemists draw from the power of bio-derived solvents to deliver solutions that enhance energy production. Flotek serves major and independent energy producers and oilfield service companies, both domestic and international. Flotek Industries, Inc. is a publicly traded company headquartered in Houston, Texas, and its common shares are traded on the New York Stock Exchange under the ticker symbol "FTK." For additional information, please visit Flotek's web site at www.flotekind.com.