Cyanco Holding Corporation, the Sugar Land, Texas-based producer of sodium cyanide, has mandated Morgan Stanley to explore a sale, five sources familiar with the situation said.

The sale process is at an early stage, some of the sources said, noting that the seller is expected to conduct a narrow sale process. Financial materials have not been distributed to prospective suitors yet, the same sources said.

The Cerberus Capital-backed chemicals company is expected to draw interest from financial sponsors, each of the sources said.

Cyanco generates around USD 90m in EBITDA, the sources said, adding that in the event of a sale it is likely to fetch a 7x-8x EBITDA valuation.

While the business has been performing well, potential buyers are likely to get a pause on how to grow the business further, two of the sources said. It is a stable business, but Cyanco’s business has not grown significantly in the past few years and it is also levered to gold prices, another of the sources said.

In June, Moody’s assigned a B2 rating to Cyanco’s new USD 50m senior secured first-lien revolving credit facility and the new USD 420m senior secured first-lien term loan B due 2028.

The agency said Cyanco’s B2 CFR reflects modest size as measured by revenues of about USD 350m, elevated leverage, single commodity product focus, concentrated customer base, limited number of facilities and market applications. The report highlighted Cyanco’s strong market position in producing and selling sodium cyanide, passing through raw materials and transportation costs to its customers and high EBITDA margins.

Further, the rating agency noted that Cyanco’s operating and financial performance remained solid in Q1 2023 supported by marginally higher volumes and the timing lag between cyanide prices and falling raw materials costs. The agency believes Cyanco will maintain high profit margins, good liquidity, remain free cash flow positive and continue to reduce leverage.

In 2019, Cerberus acquired Cyanco from Oaktree Capital Management for undisclosed terms. Founded in 1990, Cyanco is a global producer of mineral extraction technologies.

Cyanco, Cerberus and Morgan Stanley did not respond to requests for comment.