Over the course of some 26 years and several stints with different private equity partners, Italmatch has gone from a chemical plant in central Italy whose sole function was supplying phosphorous for match manufacturing parent company SAFFA to a provider of specialty solutions for water-treatment, mining, lubricants and flame retardants.
CEO Sergio Iorio was there from the start, leading the management buyout of the one remaining chemical plant in 1998. In its heyday, the match company spanned 20 plants and some 20,000 employees. By the time the MBO took place, the match industry was dead, making the purchase of the standalone facility a “big bet on an empty plant,” Iorio said in an interview with chemicalESG.
Decades of transformation, investment and M&A followed to expand into additives for phosphorus-based lubricants and flame retardants, and beyond into new chemistries and markets. As the business grew, so did the size of the private equity investor.
Italmatch’s evolution continues today with Bain Capital, although the PE firm is now five years in and approaching the twilight of its typical investment period. The focus is on ramping up innovation and new product launches to tap sustainability trends. Revenue currently exceeds EU700 million, and margins are pushing above 20%. The target has historically been to get to EU1 billion, but Covid and the fallout got in the way.
Iorio has his eye on an eventual IPO. The CEO expects above-GDP growth for the group in 2025, a year when Europe’s commodity chemical market will likely remain in the doldrums.
“We were moving into ESG way before it became a necessary target, especially for the financial markets and it is now the lever of growth with Bain,” Iorio said. “They are still supporting the company: we are looking at a bunch of medium-sized M&A targets.”
“I am talking to bondholders every three months. I hope one day we will have to report to the equity investors in the public market.”
Italmatch has more than 100 people working on innovation to come up with bio-based and biodegradable chemicals, including polymers, plus functional additives and formulations that are differentiated from the molecules coming out of China and India, according to Iorio. Working in difficult chemistries with high barriers of entry and logistical challenges further insulates Italmatch from the flood of cheap imports, he added.
“We’ve done a lot of work in the past five years, and modified our strategy a lot,” Iorio said. “Pre-Covid, we were still chasing volumes as a high priority where you sometimes have to compete with low prices and low margins.”
Consequently, Italmatch started stepping out of commodity markets like phosphonates for the cleaning industry to focus more on specialty and functional solutions. The priority is expanding further in water treatment and renewables — including products to extend the life of a geothermal plant or a wind turbine out at sea — and electrification, such as flame retardants for photovoltaics and liquid phosphorus-chloride electrolytes for EV batteries.
Getting into these markets takes time. To expand in descalants for water desalination plants meant Italmatch building mini versions of a customer’s reverse osmosis or thermal plant in the lab in order to test blends and prove their worth to clients and advance to the field-trial stage. The purchase of a 20% stake in Italmatch by Saudi Arabian investment fund Dussur helped open up the Middle East market. Iorio estimates Italmatch has been able to grab an estimated 70-80% share of the desalinated water descalant market as reverse osmosis technology replaces the thermal process.
In battery materials, Italmatch is already five years into a project with a major auto OEM to develop next generation solid electrolytes for solid-state-batteries.
“We passed the lab and pilot scale, today we are in at the industrial pilot scale supplying tons of products with a solution that’s based on sulphur,” Iorio said. From 2040, SSB could be an opportunity in excess of 50,000 tons, he added.
Looking ahead to the next five to 10 years, Italmatch is already working on and testing innovation in areas like phosphorous-based catalysts for green hydrogen to improve the yield and energy consumption, advanced metal and elements recovery, and so-called “urban mining” where patented technology is used to recover phosphorus from incinerator waste.
“These are concepts that play into circularity. Whenever the time comes, I’m sure Bain will look for a buyer that sees the same value and long-term potential,” Iorio said. “We are maybe 60-70% there. There needs to be the right chemistry to complete the transformation.”