Chemicals sector comment – April 2011

Date

Berkshire Hathaway’s $9.7bn acquisition of Lubrizol is likely to see Warren Buffett emerge as major consolidator of the fuel and lubricant additives market.

Further M&A activity in the speciality chemicals sector is likely to be stimulated by Buffett’s intention to use Berkshire Hathaway’s $1bn of free cash flow generated each month for more acquisitions. The possible re-launch of the sale of Infenium, a UK lubricant additives producer, has been mooted with its joint-venture owners, ExxonMobil and Royal Dutch Shell, weighing the strong performance of the business against a possible sale. Meanwhile, other operators in this market such as NewMarket and Oronite, a subsidiary of Chevron, are likely to be closely scrutinised by financial sponsors looking for highly cash generative assets with operations in attractive market applications.

Meanwhile, the past month has seen Clearwater act on Berner Group’s acquisition of the Ambratec-Matecra and Automotive Cleaning Chemicals subsidiaries of Amber Chemical Group. Clearwater’s chemicals team facilitated the transaction by introducing the acquisition to Berner, a German supplier of chemicals, consumables and tools to the automotive, construction and industrial maintenance markets. Our specialist knowledge of this market and its players, as well as our privileged relationship with the management of Amber Chemical, allowed us to stimulate this off market transaction for Berner. The transaction will allow Amber Chemical to focus on its core silicone specialities business.

The deal flow at Clearwater has continued with the sale of two UK agrochemical companies. United Agri Products (UAP) has been acquired by Origin Enterprises plc, an Irish distributor of agrochemicals and fertilisers. UAP is a provider of agronomy services, as well as a supplier of crop care chemicals, fertilisers and seeds. In a separate transaction, Origin Enterprises has also acquired Rigby Taylor, a supplier of fertilisers, fungicides, grass seed, herbicides and top dressings for landscaping and sports amenity applications. The two acquisitions reinforce Origin Enterprise’s position as one of the leading suppliers of agrochemicals and fertilisers to the UK agriculture, amenity and horticulture markets.

Deals

Solutia Inc has acquired some of the assets of Aimcore Technology Co Ltd, a Taiwanese manufacturer of conductive film. The $7m acquisition will allow the US group to increase its capacity with its Performance Films division with a particular focus on film components used in electronic readers, touch screens and solar equipment.

Berner SE has acquired the Ambratec-Matecra GmbH and Automotive Cleaning Chemicals Ltd subsidiaries of Amber Chemical Group Ltd. The acquisitions will enhance Berner’s distribution network for cleaning and maintenance chemicals for automotive and industrial applications.

UK private equity firm Bridgepoint Capital has backed the buy-out of CABB GmbH, a German provider of custom manufacturing solutions for fine and speciality chemicals. CABB specialises in the production of acetic acid, chlorine and monochloroacetic acid. The company’s products are used in applications such as agrochemicals, food and beverages, personal care products and pharmaceuticals. Bridgepoint Capital intends to utilise CABB for further bolt-on acquisitions in the fine chemicals sectors with a particular focus on these particular end markets. The transaction provides an exit for French private equity firm AXA Private Equity.

PPG Industries Inc has acquired certain assets of Equa-Chlor Inc, a US manufacturer of caustic soda, chlorine and muriatic acid. As part of the transaction PPG has acquired the manufacturing operations and railcars of Equa-Chlor which will provide the US group’s chlor-alkali and derivatives business with a strategic foothold in the western regions of the US.

Arysta LifeScience Corp has acquired FES Group, a Russian distributor of agrochemicals. The acquisition will provide Arysta with an expanded product portfolio and enhanced technical capabilities with which to serve its growing footprint in Russia and the former CIS countries.

Sika AG has acquired a majority stake in Hebei Jiuqiang Construction Material Co Ltd, a Chinese manufacturer of concrete admixtures. The acquisition of Jiuqiang will add a prominent brand of powder concrete admixtures to Sika’s stable of products and expand the Swiss group’s sales network across China.

Bayer AG has acquired Hornbeck Seed Company Inc, a US supplier of rice, soybean and wheat seeds including a proprietary soybean germplasm. The acquisition will be integrated into Bayer’s CropScience division where Hornbeck will complement its active trait research and development pipeline including herbicide-tolerance and insect- and nematode resistance in soybeans.

French private equity firm Edmond de Rothschild Investment Partners has acquired a 25% stake in Inventia SA. Inventia is the holding company for French cleaning and hygiene products producer Groupe Novamex SA.

United Phosphorous Ltd (UPL) has acquired a 50% stake in Sipcam Isagro Brasil SA (SIB) from Isagro SpA. SIB is a Brazilian producer and wholesaler of fertilisers. Italian agrochemicals group Sipcam-Oxon SpA has retained the other 50% stake.

Berkshire Hathaway Inc has acquired Lubrizol Corp, a US producer of lubricant additives. The transaction represents a major move by Berkshire Hathaway into the speciality chemicals sector with Lubrizol’s product range including engine oil additives, fuel additives and industrial lubricants, as well as additives and ingredients for coatings, personal care products, pharmaceuticals, plastics and speciality materials

Metalor Technologies International SA has acquired the Asian Coatings division of NE Chemcat Corp (NECC). The acquisition of NECC Coatings will provide Metalor with direct relationships with customers in electronics industry in China, Japan, Korea, Singapore and Taiwan. Metalor is as Swiss supplier of precious metals and related technologies backed by French private equity firm Astorg Partners.

Clariant AG has acquired Octagon Process LLC, a US producer of anti-icing and de-icing fluids for the aviation industry. The acquisition will enhance Clariant’s Industrial & Consumer Specialties division’s presence in North America by adding a broader supply-chain network to serve regional air carriers, airports and aviation service providers.

Olin Corp has acquired PolyOne Corp’s 50% interest in the SunBelt Chlor Alkali partnership for $132m. The SunBelt chlor alkali plant is a producer of bleach, caustic soda, chlorine, hydrochloric acid, hydrogen, potassium hydroxide and sodium hydrosulfite.

US private firms Audax and Moelis Capital Partners have acquired Quest Specialty Chemicals Inc, a US manufacturer of speciality coatings. Quest specialises in the formulation and production of preservation, repair and restoration coatings for automotive aftermarket, general industrial and roofing applications. The transaction provides an exit for US private equity firm Huron Capital.

Essar Group Ltd has acquired the Stanlow refinery from Royal Dutch Shell plc. Essar has paid $350m cash to acquire the second largest oil refinery in the UK as part of a total transaction value of $1.3bn. The transaction includes the site’s chemical manufacturing and oil products activities, as well as access to certain distribution terminal assets. It also includes the commercial bulk fuels and marine fuels businesses located at the facility.

UK private equity firm Electra Partners has acquired Sentinel Performance Solutions Ltd for $70m. Sentinel is a UK developer and supplier of treatment products to improve the efficiency and performance of residential heating and hot water systems. Its biodegradable products protect heating systems against corrosion and lime scale, as well as removing flux and sludge in the system. The transaction provides an exit for US private firm The Riverside Co.

Lanxess AG has acquired the Materials Protection division of Syngenta AG. The unit is a developer and producer of a broad range of biocidal active ingredients used in the preservation of construction materials such as coatings, wallboards and wood. These active ingredients are also used in disinfectants and stabilisers for non-alcoholic beverages and wine. The transaction is part of a long-term co-operation agreement between Syngenta and the Saltigo division of Lanxess.

Origin Enterprises plc has acquired United Agri Products Ltd (UAP), a UK provider of agronomy services and supplier of crop care chemicals, fertilisers and seeds. The Irish distributor of agrochemicals and fertilisers has also acquired Rigby Taylor Ltd, a UK supplier of fertilisers, fungicides, grass seed, herbicides and top dressings for landscaping and sports amenity applications.

ALTANA AG has acquired the US Can End Sealants business of Watson Standard Adhesives Co. The target is a producer of sealants for the metal can packaging market which will complement ALTANA’s ACTEGA Coatings & Sealants division and reinforce its position in the US market.