French oil and gas producer Total has begun preparations for the sale of its speciality chemicals and equipment division Atotech, which may be valued at about 3 billion euros ($3.4 billion), sources said.
Total said in February it was planning sales of mostly non-core assets worth about $4 billion this year and Chief Executive Patrick Pouyanne said last month that Atotech no longer fell within the company’s strategic vision.
The chemicals sector has seen a surge of mergers and acquisitions in the last year, with a tie-up between U.S. peers Dow and DuPont and ChemChina buying Swiss pesticides group Syngenta.
The deal bonanza is driven by large corporates striving to bulk up in higher-margin speciality chemicals and rely less on commodity chemicals. At the same time, they are trying to focus on key areas and divest sub-scale activities, while the cheap funding has facilitated deal-making.
Total is expected to ask Barclays to lead the divestment, the sources said, adding that a final mandate has not yet been assigned but was imminent.
An auction of Berlin-based Atotech, which generates annual sales of about $1 billion from the manufacture of speciality chemicals and equipment for printed circuit boards and semiconductors, would likely to kick off after the summer, the sources said, after sales documents had been prepared.
Total and Barclays both declined to comment.
About a dozen private equity groups are looking at the Atotech, which is expected to be sold to a buyout group as there are no obvious strategic buyers, the sources said.
People familiar with the company said they expect Atotech to generate earnings before interest, taxes, depreciation and amortisation (EBITDA) of 250 million euros this year and that the company may be valued at 12-13 times that in a sale.
That would be a slight discount to the multiple of 13.9 times core earnings that U.S. peer Platform paid for its acquisition of Alent last year.
Companies buying a direct peer are usually able to reap synergies from an acquisition, allowing them to pay more than buyout groups which do not have such cost savings potential.
Atotech is Total’s sole remaining speciality chemicals unit after the sale of Bostik in 2014.