Chemicals sector comment – July 2010

Date

So this month we have seen not one but two billon dollar transactions in the chemicals industry.

Akzo Nobel finally off-loaded National Starch to Corn Products for $1.3bn and BASF completed its $3.8bn capture of Cognis. Whilst these two transactions demonstrate how major Western players are seeking to diversify away from commodity products into more speciality segments, these headlines mask the real trend in the industry. With the larger groups divesting non-core assets, there are many players operating below the radar and taking on smaller and mid-sized acquisitions. A growing trend is Asian and Middle Eastern groups emerging as credible options for these unwanted assets and we expect more deals in the second half of 2010 involving Chinese and Indian buyers.

Another significant driver of M&A activity is that the European Union’s REACH legislation will be coming into force in December. This means that acquirors will have to decide whether they should be investing in any chemicals manufacturers that do not meet the strict legislation around chemicals registration. With customers closely examining their supply chain, groups from India and the Far East in particular need to make acquisitions involving REACH compliant companies. The opportunity to acquire non-core assets and privately-owned chemicals companies in Europe not only offers these Asian purchasers the approvals that they require, they are also picking up practices and technologies that have previously been out of their reach.

Deals

Corn Products International Inc has acquired National Starch Co from Akzo Nobel NV. The $1.3bn transaction will reinforce Corn Products’ range of food ingredients and speciality starches for consumer and food processing applications and allow Akzo Nobel to focus on its core coatings and speciality chemicals operations following the acquisition of ICI plc in January 2008.

Air Liquide SA has acquired Amco-Gaz Spzoo, a Polish distributor of compressed and liquefied gases. The acquisition will allow Air Liquide to meet the growing demand for industrial gases for the automotive, food manufacturing and metals sectors in Eastern Europe.

Techmer PM LLC has acquired the hydrophilic melt additives business of BASF SE. Techmer is a US manufacturer of additives and colours for the fibre and plastics industries which has acquired the intellectual property and technical information for the Irgasurf HL products that previously formed part of Ciba Plastic Additives.

BASF SE has acquired Cognis GmbH, a German manufacturer of speciality products for the cosmetics, detergent, health and nutrition markets. The €3.1bn transaction provides an exit for GS Capital Partners, Permira and SV Life Sciences and offers BASF a strong position in personal care ingredients based on renewable raw materials, as well as value-added products for health, home care and nutrition products.

Monument Chemicals Inc has acquired the Haltermann Custom Processing plant in Antwerp, Belgium from Dow Chemical Co. Monument Chemicals will provide custom processing and speciality chemical production services for the European chemicals industry for the plant under the name CHL Chemical.

Rhodia SA has acquired Feixiang Chemicals Ltd, a Chinese manufacturer of surfactants. The $489m transaction enhances the French group’s footprint in the Asian market and will allow the group to integrate speciality amine technologies into its Novecare portfolio. The combination of the two businesses will also enhance Rhodia’s market position in speciality surfactants for agrochemical, home care, industrial, personal care and oilfield applications.

Wacker Chemie AG has acquired the silicon-metal production business of FESIL Group ASA. The transaction includes a production plant in Holla, Norway and will secure Wacker’s long-term supply of silicon metal for the production of silicones and hyper-pure polysilicon.

RPM International Inc has acquired Hummervoll Industribelegg AS, a Norwegian supplier of industrial flooring systems. The transaction will broaden the Scandinavian presence of RPM’s Performance Coatings division through the addition of concrete and epoxy-based flooring systems for the onshore and offshore markets in particular.

American Industrial Acquisition Corp (AIAC) has acquired Industrias Quimicas Asociadas SA (IQA) from La Seda de Barcelona SA. IQA is a manufacturer of ethylene oxide and glycol intermediates which has been sold by La Seda as part of its reorganisation programme. The group is also in the process of selling its Artenius San Roque PET plant in southern Spain and its Simpe PET resin plant in Acerra, Italy.

Catec GmbH has acquired the fluorescent whitening agents (FWA) business of Kemira Oyj. The transaction includes a production plant in Leverkusen, Germany, a global sales network and the associated support functions for the production of FWAs used in improving the brightness and whiteness of paper. The deal is part of Kemira’s strategy of refocusing on products for the water industry.

Polimeri Europa GmbH has acquired Oxea GmbH‘s low density polyethylene (LDPE) manufacturing plant in Oberhausen, Germany. Polimeri Europa, a subsidiary of ENI SpA, will take full control of the LDPE production and technology at the site having previously handled product development, marketing and sales on behalf of Oxea. The transaction follows Oxea’s recent sale of its synthesis gas plant in Oberhausen to Air Liquide SA.