Chemicals sector comment – August 2011

Date

The past month saw the latest multi-billion transaction in the chemicals industry following Solvay’s acquisition of Rhodia and Ashland’s acquisition of ISP.

Ecolab has acquired Nalco for $5.4bn as part of its strategy of moving into the industrial water treatment market. The group is particularly attracted to Nalco’s presence in the fast-growing market for residual water treatment in the oil and gas industry. Nalco has a prominent position in the development of products used for water treatment during hydraulic fracturing in the shale gas market. This process, also known as fracking, is becoming increasingly complex due to the depths of the drilling activity in this sector. The treatment of water in order to reduce environmental hazards in the oil and gas industry has been brought to light following the Macondo oil spill in the Gulf of Mexico. Ecolab has recognised the significance that Nalco’s products play in managing resource consumption and water treatment in these markets. The acquisition will complement Ecolab’s existing focus on infection control and sanitisation products for the food processing, healthcare and institutional markets.

The transaction values Nalco at 10.9 times its 2011 EBITDA, although taking cost savings into account the multiple is around 9 times EBITDA. The combined group will have revenues of around $11bn with Ecolab assuming $2.7bn of Nalco debt.

Deals

Royal DSM NV has acquired a 51% stake in AGI Corp, a Taiwanese manufacturer of ultraviolet curable resins. The $59m acquisition will allow DSM to expand its range of environmentally-friendly resins used in coatings and inks.

SIBUR LLC has acquired Acrylate JSC from ATEK Group LLC. Acrylate is a Russian producer of acrylic acid and esters which will allow SIBUR to accelerate development of the market for acrylic derivatives in Russia.

AkzoNobel NV has acquired Boxing Oleochemicals Co Ltd, a Chinese manufacturer of nitrile amines and derivatives. As a result of this acquisition the Dutch group will strengthen its position in speciality surfactants and enhance its manufacturing footprint in Asia. AkzoNobel has also acquired Schramm Holding AG, a German manufacturer of coatings for electrical insulation, metals and plastics applications.

Barclays Private Equity has acquired Conventya SA, a French producer of electroplating, surface finishing and surface treatment chemicals. The transaction provides an exit for French private equity firm Nixen Partners.

WR Grace & Co has acquired De Neef Conchem Group NV, a Belgian producer of waterproofing products for the construction industry. De Neef Conchem will be integrated into Grace Construction Products where it will enhance the US group’s portfolio with concrete protection and repair products, as well as preventative and remedial waterproofing products.

Braskem SA has acquired the polypropylene business of Dow Chemical Co for $323m. The transaction includes Dow’s polypropylene manufacturing facilities at Schkopau and Wesseling in Germany as well as Freeport and Seadrift in Texas. Dow’s polypropylene licensing and catalyst business and related catalyst facilities are excluded from the deal.

Eastman Chemical Co has acquired Dynaloy LLC, a US producer of electronic chemicals. Dynaloy specialises in solvents for the electronics and semiconductor industries and will complement the group’s CASI division.

Sika AG has acquired Technokolla Srl from Fincea Group Srl. Technokolla is an Italian manufacturer of tile adhesives which will enhance the Swiss group’s distribution channels in Italy and neighbouring countries.

US private equity firm HIG Capital has acquired Haltermann Products GmbH from Dow Chemical Co. Haltermann is a producer of hydrocarbon specialities, natural alcohols, reference fuels and solvents for the automotive, graphic arts, pharmaceutical, personal care and plastics processing industries.

United Phosphorus Ltd (UPL) has acquired a 51% stake in DVA Agro Do Brasil Ltd a from DVA Group GmbH for $150m. DVA Agro Do Brasil is a producer and distributor of crop protection products.

Sherwin-Williams Co has acquired Leigh Paints Ltd, a UK manufacturer of fire protection, marine and protective coatings. Leigh Paints will enhance the US group’s presence in the fire protection coatings market with its comprehensive line of passive fire protection intumescent products for both the cellulosic and hydrocarbon markets.

Unipex Group Inc has acquired Lucas Meyer Cosmetics SA, a French producer of natural active and functional ingredients for cosmetics and personal care products. Lucas Meyer’s expertise in phospholipids will enhance Unipex’s portfolio of active ingredients, delivery systems and natural functional ingredients.

Christeyns SA has acquired Midac Srl, an Italian manufacturer of professional hygiene products for the food processing industry. The acquisition is part of the Belgian group’s strategy of reinforcing its presence in the disinfection and food hygiene market.

Ecolab Inc has acquired Nalco Holding Co, a US developer and manufacturer of water treatment chemicals. With its existing focus on the supply of cleaning and infection control chemicals for the household and institutional applications, this $5.4bn acquisition will allow Ecolab to penetrate industrial water treatment markets.

A Schulman Inc has acquired a 51% stake in Surplast SA from Alta Plastics SA. Surplast is an Argentine producer of rotational molding materials which will enhance Shulman’s presence in the South American market following its acquisition of Brazilian compounder Mash Compostos Plastics Ltda last year.

Freudenberg & Co GmbH has acquired SurTec International GmbH, a German manufacturer of surface treatment chemicals. The acquisition will be integrated into Freudenberg’s Chemical Specialties division where it will enhance its range of products for aluminium anodising and plastic galvanising, as well as the industrial cleaning, pre-treatment, processing and post-treatment of metal surfaces. The transaction also includes SurTec’s manufacturing operation in Pune, India.

US private equity firm Graham Partners has acquired Chelsea Building Products Inc from Tessenderlo Group NV. Chelsea Building Products is US designer and producer of PVC profiles for windows and doors, as well as speciality products for the US building sector.

Saco Polymers Inc has acquired AEI Compounds Ltd from TT Electronics plc. AEI Compounds is a UK manufacturer of thermoplastic and silane cross-linkable halogen-free flame retardant compounds for the cable and wire industries.

FMC Corp has acquired the European persulfates business of RheinPerChemie GmbH from Unionchimica SpA. The acquisition will strengthen FMC Peroxygens’ global reach by establishing a presence in the European persulfates market with a particular focus on the electronics, environmental and food safety markets.

Lanxess AG has acquired silicone-based tire-release-agent business of Wacker Chemie AG. The acquisition will be integrated into Lanxess’ Rhein Chemie Rheinau business where it will enhance the group’s range of products for the rubber industry. The deal includes an agreement for Wacker to supply silicone raw materials to Rhein Chemie Rheinau.