Carlyle to break up PQ to revive $3 billion auction -sources

By Greg Roumeliotis and Mike Stone

NEW YORK, Aug 7 (Reuters) - Buyout firm Carlyle Group LP is preparing to break up specialty chemical company PQ Corp, after efforts to sell the company in its entirety for as much as $3 billion were not successful, according to people familiar with the matter.

The new strategy suggests Carlyle prefers to fully divest the company through an outright sale, rather than an initial public offering. PQ has already registered with the U.S. Securities and Exchange Commission in February for a proposed public offering.

After an auction for the whole company in the first half of the year did not lead to a transaction, Carlyle now plans to sell PQ's industrial catalysts business separately from its performance chemicals and specialty glass materials, the people said this week.

The catalysts business accounts for about a third of PQ's value and has attracted interest from Umicore SA, BASF SE, W.R. Grace & Co and Johnson Matthey Plc (LSE: JMAT.L - news) , the people said.

The performance chemicals and specialty glass materials businesses will be sold as one separate package, likely to private equity firms, the people added. CCMP Capital Advisors LLC, a former private equity owner of PQ, has expressed interest, some of the people said.

All the people asked not to be named because the matter is not public. Carlyle, Umicore and BASF declined to comment. PQ, W.R. Grace & Co and Johnson Matthey did not respond to requests for comment.

Prospective corporate buyers did not want to purchase PQ's glass materials unit, which makes highway safety marking glass beads and relies on government infrastructure spending for some of its business, according to people familiar with the matter. That was one of the reasons why earlier efforts to sell all of PQ failed, the people said.

Carlyle acquired Malvern, Pennsylvania-based PQ for $1.5 billion in 2007 from CCMP and JPMorgan Chase & Co (Xetra: 850628 - news) 's private equity arm.

After the acquisition, Carlyle combined the company with industry peer INEOS Silicas, a division of petrochemical giant INEOS, to create a global producer of specialty chemicals, catalysts and engineered glass products.

Carlyle owned 50.6 percent of PQ and INEOS owned 33.7 percent as of the end of September 2013, according to PQ's IPO registration filing. PQ's management owns the rest. (Editing by Soyoung Kim in New York, Bernard Orr)