Flotek Industries, Inc. (FTK) on Friday announced its plan to sell its unit Florida Chemical Company to Archer Daniels Midland Co (ADM) for $175 million.
The consideration for the sale of Flotek’s consumer and industrial chemistry segment to ADM is fully in cash, subject to post-closing working capital and other adjustments. Flotek, however, will retain all of its patents.
In connection with the sale deal, Flotek and ADM have also entered into long-term reciprocal supply agreements. One among them is to secure Flotek’s long-term supply of d-limonene.
Additionally, Flotek will manufacture differentiated chemistries for Florida Chemical’s industrial customers.
The transaction is expected to close during the first quarter of 2019. Flotek anticipates that the deal to have a negligible cash tax effect, with the divestment gain to substantially offset its outstanding net operating losses.
Flotek CEO John Chisholm weighed in, “This transaction unlocks significant value for our stakeholders, while maintaining our access to key raw materials for our Energy Chemistry Technologies (“ECT”) business.”
ADM’s Nutrition business unit President Vince Macciocchi added, “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.”
Flotek had acquired Florida Chemical back in 2013 to integrate its supply of citrus oils on a vertical. Citrus oils were key raw material in its patented Complex nano-Fluid suite of technologies.
After the transaction closes, Flotek looks to focus more on the performance of its oil and gas wells. Flotek intends to use the net proceeds of the deal to pay off its credit facility balance of approximately $50 million.
Flotek is also considering investing $20-30 million in previously identified organic growth capital projects.