Chemicals sector comment – April 2010

Date

The latest mega-deal to hit the chemicals industry involves Cognis, the German producer of consumer and personal care chemicals.

The group has been owned by private equity firms Goldman Sachs Capital Partners, Permira and SV Life Sciences since its sale by Henkel in 2001. An announcement from its owners about a potential IPO of Cognis drew out strategic purchasers as expected, with BASF and Lubrizol reportedly leading the bidding on the €3bn plus transaction. It is no surprise to see BASF circling Cognis given its previous interest in its German counterpart. Cognis specializes in ingredients and specialty chemicals in key growth markets for BASF including dietary supplements, food and beverages and pharmaceuticals. Cognis is also developing natural source raw materials for use in cosmetics, detergents and nutritional ingredients. Other specialty chemicals in its portfolio serve the agriculture, coatings, lubricants and mining sectors.

Whilst BASF could easy swallow Cognis’ worldwide operations, the transaction would represent a step-change for Lubrizol. The US group’s largest transaction to date was its $1.84bn acquisition of Noveon in 2004, although the strength of its balance sheet would make Cognis a manageable acquisition. Lubrizol is keen to grow its portfolio of products for the personal care market where it already supplies thickeners for products such as lotions and shampoos. Other groups with a potential interest may include DuPont, whilst London-listed rival Croda International plc should not be discounted. Whilst the transaction would involve Croda acquiring a company twice its size, the UK consumer and personal care products developer has long coveted Cognis and may now seek to deliver on its global ambitions.

Clearwater has completed its latest transaction in the chemicals industry with the sale of a 40% stake in TAM International Ltd by Norman Hay plc. TAM produces specialist construction chemicals used in tunneling applications with a particularly strong presence in the Far East. For the acquiror, Normet of Finland, this represents an ideal complement to its mechanised underground concrete spraying equipment and allows the Finish group to propose a broader offering around the tunneling process. In practical terms Normet will represent TAM products in areas where TAM is not yet active and, in return, TAM will act as agent and distributor of Normet equipment and services in the UK, Hong Kong, Taiwan and ASEAN. For Clearwater, this transaction demonstrates our ability to act for listed multi-national chemicals groups on the sale of non-core activities. Our extensive experience in the chemicals industry and global access to the market allows us to deliver a seamless service on mid-market transactions.

Deals

CHT R Beitlich GmbH has acquired Alpina Technische Produkte GmbH, a German manufacturer of specialty silicones. The acquisition will expand CHT’s portfolio of silicone products by adding a range of highly viscous silicone elastomers for a variety of industrial applications.

Brenntag GmbH has acquired the industrial chemicals division of Biesterfeld Graen GmbH. The acquisition reinforces the German chemicals distribution group’s presence in the Bavarian market and follows its acquisition of Biesterfeld’s Chemiedistribution operations in Nuremberg last year.

IGM Resins BV has acquired the UV acrylates business of Cognis GmbH. The transaction includes Cognis’ Photomer intellectual property, inventory and trademarks, as well as a manufacturing facility in Charlotte, North Carolina.

Chromavis SpA has acquired Durlin France SA from Société Nationale des Poudres et Explosifs SA (SNPE). Durlin France is a developer and manufacturer of cosmetic chemicals including nail polishes and nail treatments which will add manufacturing plants in France, Poland and Thailand to Chromavis’ operations. Chromavis is backed by two Italian private equity firms, Cape Natixis Due and Progressio Investimenti. SNPE is in the process of disposing of non-core operations in advance of its privatization.

Arauco do Brasil SA has acquired the 50% in Dynea Brasil SA held by its joint-venture partner Dynea Oy. Dynea Brasil is a manufacturer of resins for the panelboard and paper impregnation industries, as well as a range of decorative paper overlays. The transaction will allow Dynea to focus on its operations in Asia and Europe and will not affect the group’s Brazilian phenolic resin manufacturing operations. Arauco do Brasil is a manufacturer of MDF and particleboard and related lumber and a subsidiary of Arauco Group SA of Chile.

Pulcra Chemicals GmbH has acquired the plant and assets of DyStar GmbH‘s facility in Geretsried, Germany. The fiber, leather and textile manufacturing plant had been idle for four months following the insolvency of its previous parent which was acquired by Kiri Dyes and Chemicals Ltd of India earlier this year. Pulcra will use the Geretsried site as the main production facility for its leather and textile business and thereby create a centre of excellences for its European operations.

Ferro Corp has acquired the ceramic color operations of Heraeus Holding GmbH. The US group also acquired the ceramic glazes and pigments operations from its German counterpart. As part of the transaction Heraeus has acquired Ferro’s operations which focus on the development and production of precious metal preparations and lustres for the decoration of ceramics, glass, porcelain and tiles.

SNF Floerger Groupe SA has acquired the acrylamide division of Mitsubishi Rayon Ltd. The transaction prevents Mitsubishi Rayon violating any anti-monopoly legislation following the acquisition of the Japanese group by its peer Mitsubishi Chemical Ltd last year.

Normet Group Oy has acquired 40% stake in TAM International Ltd from Norman Hay plc.TAM is a manufacturer of construction chemicals used in tunneling applications which will complement Normet’s range of concrete spraying equipment.

Intertek Group plc has acquired the Regulatory and Safety Testing division of Ciba Expert Services GmbH from BASF SE. The acquisition will reinforce Intertek’s Industrial Services and Analytical Services division by adding expertise in environmental, health and safety approvals for chemicals and hazardous substances. The business has a particular focus on chemicals notifications and regulations such as the REACH chemicals registration programme in the European Union. The transaction also includes Ciba’s testing services for highly regulated environments in the chemicals, healthcare, nutrition and pharmaceutical industries.