Cabot to Sell Purification Solutions Business for $111M; Street Says Buy

Specialty chemicals and performance materials company Cabot Corporation (CBT) recently revealed that it has entered into a definitive agreement to sell its Purification Solutions business to a middle market private equity firm, One Equity Partners, for $111 million.

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The deal is likely to close in the second quarter of Fiscal Year 2022. Shares of the company declined 4.3% on Friday to close at $55.82.

About the Business

One of the leading providers of carbon black, specialty carbons, activated carbon, elastomer composites, inkjet colorants, masterbatches and conductive compounds, fumed silica and aerogel, Cabot generated revenues of $257 million in fiscal 2021. The company expects to realize net cash proceeds of about $80 million from the transaction.

Management Commentary

The CEO of Cabot, Sean Keohane, said, “We are pleased to have reached an agreement with One Equity Partners as they have a proven track record of advancing market-leading industrial companies and are committed to the future success of the business. At the same time, this transaction will allow us to focus resources on our core business segments and invest in areas where we see strong future growth and innovation potential for Cabot, such as Battery Materials.”

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Price Target

Recently, Deutsche Bank analyst David Begleiter maintained a Hold rating on the stock. The analyst, however, raised the price target from $58 to $62, which implies upside potential of 11.1% from current levels.

According to the analyst, the company’s strong fourth-quarter results, along with a bright outlook for the tire battery materials business, bode well for the company.

Consensus among analysts is a Strong Buy based on 3 Buys and 1 Hold. The average Cabot price target of $73.25 implies upside potential of 31.2% from current levels.

Smart Score

Cabot scores a 9 out of 10 from TipRanks’ Smart Score rating system, indicating that the stock is likely to outperform market expectations. Shares have gained 34.8% over the past year.