Chemicals sector comment – July 2013

Dato

The flavours and fragrances market is experiencing noticeable levels of activity in the M&A market with two significant transactions in the last month alone.

European Flavours and Fragrances, via its subsidiary Aromas y Fragancias Europeos, has acquired the flavours division of the Spanish flavours and fragrance company EuroFragrance SL. Eurofragrance made the decision to sell the flavours business so that they could focus on their core business of fragrance which has been growing at more than 10% annually since 1990. Given that EFF is looking to strengthen its flavours division in Southern Europe, Spain was an obvious strategic location for an acquisition.

In another transaction, Magnum Capital Industrial Partners has acquired a majority stake in Spanish fragrances and flavours company Iberchem SA. Iberchem, which reported revenues of $75m in 2012 and employs more than 320 people across its subsidiaries, has more than 11 production centres in Spain, China, Indonesia, Malaysia, India, Italy, Tunisia, Colombia and Mexico. The company was sold through an auction process which saw interest from approximately 25 international and local investors. It is reported that Magnum paid c. $105m, equating to 8x EBITDA.

A recent trend which will undoubtedly become more and more important in the coming years is the requirement for natural ingredients from sustainable sources to be used in flavours and fragrances. This is also true of the colourants market. Last year, Clearwater advised on the sale of Phytone to FMC Corporation. Phytone is a fast-growing developer and producer of natural colours and formulations for the food and beverages, nutrition and personal care sector.

Deals

Michelman Inc has acquired Ecronova Polymer GmbH, a Germany-based manufacturer of water-based polymers used in the production of paints and laquers. The addition of Ecronova’s product lines, their people, and their innovative manufacturing processes with give Michelman greater technical capabilities that will be strategically utilised beyond their paint and coatings business.

Clariant AG, a specialty chemicals manufacturer, and Wilmar International Limited, an Asian agribusiness group, have received merger clearances for the establishment of their 50:50 joint-venture called “the global amines company” which is now in operation. The global amines company will be the global platform for production and sales of fatty amines and selected amines derivatives and will draw on Wilmar’s strong position in oleochemicals and Clariant’s technical experience and market presence.

Chemetall GmbH has acquired Andre Coatings GmbH, a Germany-based developer of paint systems for the coil coating, steel, wood and plastics industry. Chemetall will benefit from Andre Coatings’ decades of experience in the development and production of high quality paint coating systems.

Zhejiang Jinsheng Mechanical & Electrical Co Ltd has acquired the natural fibres business of OC Oerlikon Corp AG. The divestment will enable Oerlikon to focus on the manmade fibre business and has renamed the textile segment the Manmade Fibres Segment.

European Flavours & Fragrances plc has acquired the flavours division of Eurofragance SL. The transaction will allow Eurofragance to focus on their core business of fragrance only.

Syngenta AG is to acquire MRI Seed Zambia Ltd and MRI Agro Ltd, a leading developer, producer and distributor of white corn seed in Zambia. The acquisition reflects Syngenta’s commitment to sustainable development in Africa.

Borealis AG has acquired GPN SA, France’s largest nitrogen fertilizer manufacturer, from Total SA. Borealis is already active in nitrogen fertilizers in Central Europe, as well as France and the transaction will open up new growth opportunities for GPN. On the same date Borealis closed an agreement with Total to acquire its majority interest in Rosier SA, a mineral fertilizer manufacturer.

Kemira Oyj has agreed to acquire 3F Chimica SpA, a privately-owned producer of dry and emulsion polyacrylamide polymers and related process chemicals. The transaction which excludes a certain part of 3F’s assets in the US, will accelerate Kemira’s strategic plan and secure their position as a leading global polymer producer.

Eltek Holding AS has acquired Dynea AS, a specialist in wood adhesives for the European market, from Dynea Chemicals Oy. The sale of Dynea AS is in line with Dynea’s strategy of concentrating its resources around its phenolic resin activities.

A management buyout team backed by private equity firm Endless LLP has acquired James Briggs Ltd, a supplier of aerosols and specialty chemicals. As part of the deal, Endless will provide funding to invest in sales, marketing, infrastructure, manufacturing equipment and IT systems.

Mitsubishi Chemical Corporation has acquired the compounds activities of Tessenderlo Chemie NV. The divestment is in line with Tessenderlo’s strategy to focus on specialty products and services in the areas of food, agriculture, water management and valorising bio-residuals.

Sika AG has acquired Everbuild Building Products Ltd, the UK’s largest independent manufacturer of sealants, adhesives and construction chemicals. Everbuild will operate as a subsidiary of Sika and will have the possibility to further grow the business and benefit from the broad R&D capabilities for further product innovation.

Magnum Capital Industrial Partners has acquired Iberchem SA, a Spanish fragrance company. The transaction provides an exit for Capital Alianza Private Equity Investment SA.