Chemicals sector comment – September 2010

Date

With the agrichemicals market proving to be fertile ground for mergers and acquisitions, at Clearwater we have recently advised on the sale of privately-owned AgriGuard Holdings Ltd to Mitsui & Co Ltd.

AgriGuard is a developer and supplier of branded crop and plant protection chemicals. Based in Dublin, Ireland, the company’s products include fungicides, herbicides, insecticides and plant growth regulators. It invests heavily in the in-house development of generic plant protection products and the registration of these under the AgriGuard brand name.

This transaction is a clear indication of how Asian groups are seeking to acquire intellectual property in Western markets. Mitsui, one of Japan’s largest general trading companies, has acquired AgriGuard via its European subsidiary Mitsui AgriScience International (MASI) which focuses on the distribution of proprietary insecticides and fungicides from Japanese manufacturers for horticulture crops such as fruits and vegetables. The acquisition of AgriGuard enhances MASI’s expertise and product range in agrichemicals for arable crops in Europe in particular. MASI already offers a combination of agrichemicals and biological pesticides to global customers and aims to grow its turnover in agrichemicals to $1bn in the next 3 to 5 years.

The transaction is the result of a carefully managed sale process on behalf of the owner of AgriGuard which involved discussions with a small number of strategic purchasers. It represents Clearwater’s eighth deal in the chemicals industry since January 2008, all of which have been cross border in nature.

Deals

Feralco AB has acquired the Eka Chemicals water treatment chemicals unit of AkzoNobel NV located in Vetlanda, Sweden. The plant is a manufacturer of polyaluminium chloride products which will expand Feralco’s presence in the industrial water treatment, municipal and pulp and paper markets.

Makhteshim Agan Industries Ltd (MA Industries) has acquired Albaugh Inc for $1bn. Albaugh is a US developer of generic crop protection chemicals which will significantly enhance MA Industries’ presence in the North American market and establish the Israeli group as the largest global generic agrochemicals group.

Chemigate Oy has acquired the Finnish starch business of BASF SE. The transaction includes BASF’s cationic reagents business and five plants at four sites in Finland.

Pertronas Bhd has acquired the Malaysian ethylene and polyethylene production plants of BP plc for $363m. The transaction involves BP’s 15% interest in Ethylene Malaysia Sdn Bhd and the group’s 60% interest in Polyethylene Malaysia Sdn Bhd.

KiiltoClean Oy has acquired Farmos Holding Oy, a Finnish manufacturer of cleaning chemicals, detergents and hygiene products. The transaction provides an exit for private equity firms CapMan and Langholm Capital and will allow KiiltoClean to expand its activities into the Baltic region and Russia.

Flint Hills Resources LLC has acquired two ethanol plants located in Iowa, USA, from Hawkeye Energy Holdings LLC which filed for Chapter 11 bankruptcy protection in December 2009. The acquisition offers Flint Hills Resources, a subsidiary of Koch Industries Inc, the opportunity to add 110m gallons of annual ethanol production to its existing production base in transportation fuels.

Brenntag AG has acquired the Industrial Chemicals & Solvents division of Houghton Chemical Corp (HCC).The acquisition enables Brenntag to increase its US market share and improve its position in the CASE (coatings, adhesives, sealants and elastomers), personal care and pharmaceutical markets.

Huntsman Corp has acquired the chemicals business of Laffans Petrochemicals Ltd. Located in Ankleshwar, India the unit is a manufacturer of amines and surfactants which, together with Huntsman’s recently announced expansion of its polyetheramine facility in Singapore, will meet the growing demand for amines in Asia.

Vantage Specialty Chemicals LLC has merged with Lipo Inc, a US manufacturer of speciality chemicals for the food, personal care and pharmaceutical industries. The transaction includes Lipo Technologies Inc and Ruger Chemical Co Inc, as well as Lipo’s operations in Argentina, Brazil, Chile, China, Colombia, Costa Rica, France, Guatemala, Mexico, Peru, South Africa and Venezuela. Vantage Specialty Chemicals is backed by HIG Capital, a US private equity firm.

Teijin Ltd and Mitsui Chemicals Inc have agreed to merge their polyethylene terephthalate (PET) resin operations. The as yet unnamed joint-venture will include Mitsui’s purified terephthalic acid (PTA) production facilities and will see the two Japanese groups integrate their production, marketing and sales activities.

Teknos Oy has acquired Oliva Spzoo, a Polish manufacturer of industrial paints. The acquisition by the Finnish paints group will strengthen its presence in the Polish paints market for industrial and marine applications in particular.

Praxair Inchas acquired a 49% stake in the Kuwait, Qatar and UAE operations of ROC Group Ltd. ROC is a supplier of industrial and medical gases across the Middle East.

Fuchs Petrolub AG has acquired the worldwide food grade speciality lubricants business of Royal Dutch Shell plc. The acquisition includes product technology, the customer base and the Cassida brand which will expand Fuchs Petrolub’s range of food grade lubricants.

Time Technoplast Ltd has acquired the European Plastic Product division of Solutia Inc. The transaction includes the AstroTurf and Clear Pass brands for artificial turf and mats.

Yara International ASA has acquired a 47% stake in Suez International Nitrate Co. The transaction is part of a formal agreement with Saudi Chemical Co, a Saudi producers of explosive and fertilizers.

Clayton, Dubilier & Ricehas acquired a 42.5% stake in Univar NV, the global chemicals distributor, for $1.8bn. CVC Capital Partners will retain a 42.5% stake in the group with the remaining equity held by Univar’s management. As a result Univar has postponed its initial public offering. Clayton, Dubilier & Rice is a US private equity firm.

Dorf Ketal Chemicals Ltd has acquired Vertec Ltd, a UK manufacturer of organic titanate and zirconate catalysts for coatings, inks, polyester, polymers and polyurethanes. The Indian group has acquired Vertec from Johnson Matthey plc with which it has entered into a toll manufacturing agreement until March 2011.

IMCD Group NV has acquired the distribution business of Warwick International Group Ltd. The transaction includes Warwick’s speciality chemical distribution operations in France, Italy, Malaysia, Portugal, Slovenia and Spain.