Chemicals sector comment – December 2010


Transaction multiples in the chemicals industry are on the rise as both private equity and trade purchasers compete for crucial assets.

Many groups have demonstrated throughout 2010 that their balance sheets are in a healthy enough position for them to make acquisitions and thereby rapidly position themselves with attractive positions in growing end markets. The return of private equity bidders is restoring healthy competition to sale processes, as seen in TPG’s recent purchase of Ashland’s distribution division. Acquisitions in emerging markets are also ramping up with Evonik and Makhteshim Agan Industries amongst the groups to have added important routes to market in Asian and Central American in the past month.

Looking forward to next year, many Asian players are expected to play an important role in transactions in the chemicals industry. Their craving for access to natural resources is widening into a demand for acquisitions in other related industries. Whilst Reliance Industries continues to scour the market for acquisitions, Lumena Resources and Honam Petrochemical are just two Asian groups that have each recently completed $1.5bn acquisitions. Whilst initially we expect the preference for larger assets to remain, many Chinese and Indian groups are pursuing smaller acquisitions, particularly in Europe where the REACH regulations are impacting on their sales into the EU.


US private equity firm TPG has acquired the distribution business of Ashland Inc for $930m. The division is a distributor of chemicals and plastics on behalf of manufacturers such as BASF, Borealis, ExxonMobil, LyondellBasell and SABIC. It operates 132 warehouses in North American and 14 in Europe.

INEOS Holding AG and BASF SE have entered into a joint-venture to combine their respective styrenics businesses. The joint-venture will be part of the Styrolution unit which BASF formed in October to cover its styrenics operations. The new company will combine activities spanning acrylonitrile butadiene styrene (ABS), styrene monomers (SM), polystyrene (PS) and styrene butadiene copolymers, as well as other styrene-based copolymers and copolymer blends. At the same time, INEOS has acquired Nova Chemical Corp’s 50% stake in their styrene and styrenic polymers joint-venture which it also intends to incorporate into Styrolution. This unit is a manufacturer of commodity and performance styrenics including polystyrene used in extrusion and injection moulding, as well as expandable polystyrene used in block and shape moulding applications in the construction and packaging industries.

Central European private equity firm ARX Equity Partners has acquired a minority stake in Bochemie Group sro, a Czech distributor of household care and speciality chemicals. ARX will join existing investor, Czech private equity firm Benson Oak Capital, in supporting Bochemie’s strategy of widening its operations in the Central and Southeast European household chemicals sector through acquisitions.

Dugdale plc has acquired Berwin Polymer Processing Group Ltd’s PVC compounding business. The acquisition is part of Dugdale’s strategy to grow its PVC compounding activities and will allow Berwin’s to focus on developing its rubber and silicone compounding operations.

Kiri Dyes and Chemicals Ltd has acquired the US operations of DyStar Holdings GmbH. Earlier this year Kiri Dyes completed the acquisition of the German textile dyes manufacturer excluding these leather and textile chemical manufacturing operations. The transaction reunites DyStar’s North American operations with its global businesses, all of which are now under the ownership of the Indian dye chemicals consolidator.

German private equity firm Aheim Capital has acquired the German operations of Ercros SA. The sale of these emulsion manufacturing operations to a management buy-out will allow the Spanish group to focus on its core basic and intermediate chemicals businesses.

SKC Co Ltd has acquired a 45% stake in Evonik AG’s Degussa Peroxide Korea operations. Evonik will retain the other 55% stake in the South Korean operations in a transaction that will result in a greater degree of protection from market prices.

Makhteshim Agan Industries Ltd (MAI) has acquired Ingenieria Industrial SA de CV, a Mexican manufacturer and distributor of copper-based pesticides. The acquisition will give MAI access to the growing Mexican crop protection market and will enhance the group’s capabilities with the addition of the target’s crop protection method used in organic agriculture. At the same time, MAI has completed the acquisition of JK Inc, a South Korean distributor of crop protection chemicals. The transaction includes JK’s local formulation facility and fulfils the group’s strategy of expanding in emerging Asian markets.

Indorama Ventures plc has acquired the North American PET polymer and resin manufacturing operations of INVISTA Sarl. The $420m transaction includes INVISTA’s facilities located in Spartanburg, USA and Querétaro, Mexico which produce polyester resins used in bottles for beer, carbonated soft drinks, juice, water and wine, as well as polyester staple fibers and specialty polymers for a variety of applications.

Italian private equity firm Mandarin Capital PartnerS has acquired Italmatch Chemicals SpA for $130m. Italmatch is an Italian manufacturer of phosphorus derivatives for lubricant oil additives, plastic and polymer flame retardants and other industrial applications. The transaction provides an exit for pan-European private equity firm Investindustrial.

DuPont de Nemours Co has acquired MECS Inc, a US manufacturer of speciality sulfuric acid products. MECS’ products are used to convert sulfur pollutants into sulfuric acid which have particularly attractive clean air and fuel applications in the chemicals, fertilizer, metals and petroleum refining markets in emerging markets such as Brazil, China, India and the Middle East.

BASF SE has acquired Royal Dutch Shell plc‘s CRI/Criterion styrene catalyst business. CRI/Criterion is a US manufacturer of chemical catalysts used in the dehydrogenation of ethylbenzene to styrene, a vital ingredient in the manufacture of plastics, resins and rubber. The acquisition will complement BASF’s existing styrene catalysts business whilst also offering growth opportunities in emerging regions such as China and the Middle East.

Houghton International Inc has acquired the Metalworking and Metal Rolling Oils operations of Royal Dutch Shell plc. The acquisition will allow Houghton to expand its portfolio of metal working and metal rolling speciality fluids and in doing so widen its global customer base.

Lumena Resources Corp has acquired Sino Polymer New Materials Co Ltd, a Chinese manufacturer of polyphenylene sulfide (PPS) plastic resin. The $1.5bn acquisition will enhance Lumena’s ability to operate as a vertically integrated producer of PPS for the aerospace, automotive, electrical applications, coatings, electronics, energy control, environmental protection and transportation markets.

A consortium of investors has acquired Caffaro Chimica Srl from SNIA SpA. The consortium comprises Italian chemicals distributor Bertolini Group SpA, Italian pharmaceutical products developer Bracco SpA and the investment arm of the region of Friuli Venezia Giulia. Caffaro Chimica is a manufacturer of fine and speciality chemicals.

Lanxess AG has acquired Perkalink, the anti-reversion agent manufacturing operations of Solutia Inc. The sale will allow Solutia’s Flexsys division to focus on the production of high value-added rubber chemicals.

Honam Petrochemical Corp has acquired Titan Chemicals Corp, a Malaysian manufacturer of olefins and polyolefins. The $1.25bn by South Korea’s second-largest ethylene producer will increase its capacity to meet the needs of the growing plastics and synthetic fibers markets in locations such as Central Asia, China and the Middle East.

WR Grace & Co has acquired Wuhan Meilixin New Building Materials Co Ltd (Meilixin), a Chinese manufacturer of waterproofing chemicals. Meilixin’s products include fit-for-purpose waterproofing membranes including cementitious capillary crystalline waterproofing materials, multi-layer macromolecule compound membranes and self-adhesive rubber membranes. The acquisition will be integrated into Grace Construction Products’ Specialty Building Materials division where it will reinforce its presence in the Southeast Asian market.

Azelis SA has acquired YDS Chemicals SA, a Belgian distributor of homecare and personal care chemicals. The acquisition will reinforce Azelis’ presence in the Benelux market where it will also add YDS’ range of crop protection chemicals, oleo-chemicals, pharmaceutical excipients, speciality food ingredients, surfactants and textile auxiliaries.