Chemicals sector comment – August 2010


M&A activity in the chemicals industry has shown a return to healthy levels of activity and valuations not seen since before the recession. Cash rich buyers are trawling the market in an environment where corporate earnings and forecasts are facilitating more confident deal making.

Equally many groups have kept their powder dry and the likes of A Schulman, DSM, Dupont, Huntsman, PolyOne and Solvay are just some of the groups to have dramatically improved their cash positions through the downturn. At the same there are a raft of groups, including Chemtura, LyondellBasell, Solutia and WR Grace, that are returning from bankruptcy and complex restructurings and which are natural targets for cash-rich buyers.

Improved confidence amongst corporate acquirors is also leading to renewed talk of private equity competition for many chemicals businesses coming to market. Bain Capital’s $1.6bn acquisition of Dow’s Styron unit exemplifies how private equity firms are returning to the market for large transactions. Through this transaction Dow achieved a healthy valuation for a subsidiary which has a complex joint-venture with Chevron Phillips in Americas Styrenics. Another transaction attracting private equity interest is the sale of Basic Chemicals Solutions, the US distributor of inorganic commodities and speciality chemicals, which has attracted a valuation of nearly $1bn. Numerous financial sponsors are taking part in the auction and thereby providing healthy competition to trade bidders such as Brenntag and Univar.

Our expectation is that this private equity interest in large chemicals group will generate further competition for smaller and medium-sized chemicals companies. Corporate buyers are increasingly targeting niche players that can dramatically enhance their product portfolios or accelerate their moves into emerging markets. Many of these groups are shying away from larger, riskier transactions in favour of using their cash reserves for a series of smaller acquisitions.


Kemira Oy has acquired plant Albemarle Corp‘s in Teesport, UK. The facility is a manufacturer of corrosion inhibitors and drilling emulsifiers for the oil and gas industry that will strengthen the Finnish group’s position in the region and accelerate the introduction of its water strategy.

Stepan Co has acquired Alfa Systems Spzoo, a Polish manufacturer of polyester polyols. The acquisition will give the US group a manufacturing presence in Eastern Europe and the ability to produce aromatic polyester polyols from recycled polyethylene terephthalate. At the same time, Stepan has acquired Cremer GmbH’s methyl ester plant in Singapore. The group has also increased its stake in Stepan Philippines Inc (SPI) from 50% to 88.8%. SPI is a manufacturer of surfactants used in cleaning products, detergents and laundry products. United Coconut Chemicals Inc has retained an 11.2% stake and will continue to operate an adjacent alcohol plant for the supply of feedstock raw materials to SPI’s surfactants plant.

Evonik AG has acquired the polyurethane foam stabilizers business of the BYK Additives & Instruments division of Altana AG. The acquisition complements Evonik’s existing portfolio of polyurethane foam additives and enhance its presence in the Asian market in particular.

Sonneborn Inc has acquired the natural sodium sulfonates and oxidized petrolatum business of Chemtura Corp. The assets acquired include the Petronate sodium sulfonate detergent and Oxpet oxidized petrolatum corrosion inhibitor brands.

Air Liquide has acquired Cryogas de Centroamerica SA, a Panamanian supplier of industrial and medical gases. The acquisition of Cryogas’ air separation, filling, distribution and retail assets marks Air Liquide’s first entry into Panama and reinforces its presence in the Central American market. Air Liquide has also acquired H-Plus SGS Ltd, a South Korean supplier of carbon monoxide and hydrogen. The group has also acquired Lion Copolymer LLC, a US supplier of synthetic rubber products.

Quaker Chemical Corp has acquired the US aluminum hot rolling oil division of DA Stuart Co from Houghton International Inc. The transaction will allow Quaker to reinforce its position in the US primary metals market by adding DA Stuart’s Alushield and B-Series aluminum hot mill rolling oils to its portfolio of lubrication and surface treatments.

Brenntag AG has acquired EAC Industrial Ingredients Ltd for EUR 160m from East Asiatic Co Ltd. EAC Industrial Ingredients is a provider of chemical distribution services in nine countries in South East Asia. The transaction is part of Brenntag’s strategy to pursue acquisitions in the Asia-Pacific and Latin American regions following its flotation in May.

Sika AG has acquired Greenstreak Group Inc, a US manufacturer of construction chemicals. The acquisition will strengthen Sika’s position in the North American market for engineered concrete waterproofing products by adding Greenstreak’s portfolio of architectural form liners, doweling systems, forming accessories, joint seals, pipeline protections and waterstops.

Bilcare AG has acquired the Global Films division of INEOS Ltd. The division is a manufacturer of packaging materials for to the pharmaceuticals industry including blister packaging, capsules, films for printing and decoration and shrink film for sleeves.

AkzoNobel NV has acquired Lindgens Metal Decorating Coatings and Inks AB, a Swedish manufacturer of coatings and inks for the metal packaging industry. The acquisition will add technology to AkzoNobel’s Packaging Coatings division, particularly in the market for two-piece metal packaging inks used in beer and beverage cans, caps, closures, food cans and general line cans.

Cabot Corp has acquired Oxonica Materials Inc (OMI) from Oxonica plc. OMI is a developer of surface enhanced raman scattering materials used in anti-counterfeiting applications in brand security, fuel markers and product identification. 

Colorcon Inc has acquired Pharmaceutical Coatings Pvt Ltd, an Indian manufacturer of pharmaceutical film coatings. The acquisition enhances Colorcon’s range of products for hermal, neutraceutical and vitamin applications in the Asian region.

Total SA has completed its acquisition of the polystyrene production lines and related polystyrene business of Polimeri Europa SpA, a subsidiary of ENI SpA. The unit is a manufacturer of polystyrene used in consumer goods, electrical and electronic appliances and packaging.

Ultrachem Ltd has acquired the speciality manufacturing business of RW Coatings Ltd. Ultrachem is a UK manufacturer of coatings, pressroom chemicals and UV inks.

Plastic Omnium SA has acquired the 50% stake in Inergy Automotive Systems SA held by Solvay SA. The disposal will allow Solvay to concentrate its development of high-added value specialty polymers for automotive applications.

Ashland Inc and Sud-Chemie AG have agreed to merge their foundry chemicals businesses in which each will own a 50% stake. The joint venture will be known as ASK Chemicals GmbH and will be headquartered in Hilden, Germany. ASK Chemicals will comprise Ashland-Sudchemie-Kernfest GmbH, a previous joint-venture between the two groups, Sud-Chemie’s Foundry Products and Specialty Resins division and Ashland’s Casting Solutions division. ASK Chemicals will operates as a supplier of additives, binding agents, cores, finishing tools, metallurgical additives, resins and separating agents.

Wenzhou Liucheng Group Co Ltd has acquired a 50% stake in Zhejiang Ruicheng Effect Pigment Co Ltd, a Chinese manufacturer of effect pigments, from BASF SE. The two groups had previously operated the business as joint-venture.