Chemicals sector comment-February 2013

Date

Clearwater’s Chemicals Team has just returned from a road show in India. Our meetings with numerous fast-growing Indian companies provided an invaluable insight into the strategies of these increasingly prominent players.

With many of them experiencing growth in the range of 20-30% per annum, these companies are having to define very focused and clear investment strategies. For many, the domestic growth opportunities are so significant that they are turning their attention to sizeable investments in their core operations. At the same time, however, they are keen to harness new technologies, routes to market and relationships with new customers. To this end, the subject of acquisitions is also featuring prominently on the agenda.

It is evident that in order to satisfy the increasing sophistication of their domestic market, these cash-rich companies are seeking targets which would supplement their existing product portfolios. Their focus is therefore on differentiated Western-based players which would fit neatly into their “near-shore far-shore” strategy, offering high quality production capabilities which could be adopted in the domestic market to serve the growing demand.

Deals

Eurecat SA has acquired Tricat Industries Inc, a US supplier of catalyst services and products to the petroleum refining and petrochemical processing industries. The acquisition enhances Eurecat’s processing capabilities with the addition of two industrial sites located in McAlester, Olka and Bitterfeld, Germany.

The management of the Swiss operations of Staehler International GmbH & Co KG, a subsidiary of Cheminova AS and a distributor of plant protection products has acquired the company in a management buyout. Cheminova’s divesture of the company which had no strategic significance for the group will result in a strengthening of earnings.

Evonik Industries AG and Petronas Gas Berhad are to jointly embark on the development of production facilities of specialty chemicals within Petronas’ Refinery & Petrochemical Integrates Development (RAPID) project in Pengerang, Johor. The project is another step forward in Evonik’s Asian growth strategy and will strengthen Petronas’ position as a key downstream petrochemical player in the region.

BASF SE and China Petroleum & Chemical Corporation “Sinopec” have completed a joint feasibility study and taken the next steps in the establishment of a world-scale isononanol (INA) plant in Maoming, Guangdong, China. Under the terms of the feasibility study, a new 50-50 JV will be formed “BASF MPCC Co Ltd” and production is expected to begin mid-2015.

Novozymes A/S has acquired Iogen Bio-Products Inc, Iogen Corporation’s industrial enzyme business for $66m. The acquisition complements Novozyme’s existing business in the pulp & paper, textile, grain-processing and animal feed industries.

Caldic BV has acquired Sollaari Oy, a Finnish supplier of specialty food ingredients for the Nordic and Baltic food markets. The acquisition underlines Caldic’s strong commitment to the food industry and will expand their business in the Nordic and Baltic food ingredient markets.

Clariant AG has acquired CRM International SAS, a French manufacturer of natural ingredients for the personal care industry. The acquisition strengthens Clariant’s Industrial and Consumer Specialties Business Unit (ICS), which aims to accelerate sustainable, high performance solutions.

Serafin Private Holding GmbH has acquired BASF’s CONICA Sports Surfaces business and its site in Switzerland. The business which produces flooring systems for running tracks, sports halls, tennis courts, playgrounds and artificial turf solutions was not considered strategic for BASF and presents strong growth opportunities for Serafin.

Bayer CropScience AG is to acquire Prophyta Biologischer Pflanzenschutz GmbH, a supplier of microbial crop protection products. The acquisition complements Bayer’s portfolio and will help the company build a leading offer of integrated crop solutions.

The Kermas Group, through a special purpose company Alwernia Invest Sp z.o.o. is to acquire Alwernia SA, a manufacturer of phosphorus and chromium compounds as well as agricultural fertilizers. The transaction provides an exit for listed Polish chemical group Ciech Group SA.

Private equity firm SK Capital LLC has acquired the Textile Chemicals, Paper Specialities and Emulsions businesses of Clariant AG. The divestment for Clariant marks a significant milestone in the execution of its profitable growth strategy, after the acquisition of Sud-Chemie in 2011.

Spencer Coatings Ltd has acquired RJ Stokes & Co Ltd “Stokes Paints”, a manufacturer of paints for $8m. The acquisition will support Spencer Coating’s continuing growth in global markets.

Air Liquide SA, via its subsidiary Seppic SA, is to acquire BioTechMarine SA, a designer and marketer of active ingredients made from algae for the global cosmetics industry. The acquisition will provide Seppic with complementary expertise in marine biotechnologies and plant cell culture.

Private equity firms Uni-World Capital LP and Brightwood Capital Advisors LLC have acquired VanDeMark Chemical Inc, a US phosgenation specialist. The transaction provides an exit for private equity firm Buckingham Capital Partners LP whilst the new owners are planning to launch an expansion programme to broaden markets and operations.