AIP launches Molycop sale

American Industrial Partners is understood to have kickstarted the sales process for Molycop with promotional material now out in the market for the $2bn-odd Australian mining consumables business.

Advisers Record Point and Morgan Stanley are working on the sale.

Flyers are out in the market, sources have said, with the sales process launching this week.

Molycop was previously part of steel manufacturing company Arrium.

US-based private equity firm AIP purchased Molycop in 2016 for $1.6bn after Arrium was placed into administration earlier that year.

Molycop was considered to be the “jewel in the crown” and may now fetch a price of more than $2bn.

The business is expected to be sold by way of a trade sale rather than a float, with private equity buyers the most likely to line up.

Molycop, which manufactures steel balls used in mining, dominates the global market and held about 80 per cent market share when it was sold last time.

One of the parties that competed for the business when it was up for sale last time around was Pamplona Capital Management, of which David Lang was a founding member and partner based in London.

However, Mr Lang moved to Kohlberg Kravis Roberts based in Australia in 2018.

With Mr Lang is familiar with the business, it could indicate that KKR emerges as a bidder.

Blackstone, which earlier looked at the business, could also be a serious contender, with large industrial companies right in its sweet spot when it comes to generating strong returns for its investors.

Other earlier suitors were Platinum Private Equity, Argand, Cerberus, KPS Capital, Apollo, Rhone Capital, Carlyle, Sigdo Koppers, TPG and Bain Capital.

By 2016, Arrium had grown Molycop’s annual earnings before interest, tax, depreciation and amortisation from about $160m to $211m, although it remains unclear where it currently stands from an EBITDA perspective.

While Molycop is based in Australia, it is considered a global business.

It describes itself as the largest supplier of mining consumables and associated services globally.

It has 12 manufacturing sites globally, with manufacturing capacity in excess of 1.8 million tonnes a year.

The business is for sale as proceedings remain under way in the NSW Supreme Court over the collapse of Arrium.

Eight law firms are involved in three proceedings, which include claims by Arrium’s lenders such as Westpac, BBVA and Bank of Communications that its directors made efforts to borrow money while insolvent.