Chemicals sector comment – January 2011

Date

December 2010 was the most prolific month for deal making in the chemicals industry for several years.

Multinational groups using cash reserves for bolt-on acquisitions remained a constant theme and now Asian purchasers are emerging as serious contenders for large-scale acquisition opportunities. China National Chemical Corp’s (ChemChina) move to acquire a controlling stake in Makhteshim Agan Industries Ltd of Israel is a prime of example of how Chinese groups are keen to meet their domestic demand for raw materials.

With the oil and gas industry in particular having seen considerable Chinese acquisition interest in 2010, it is now the turn of the chemicals industry. Sinochem Corp considered a counter-offer to BHP Billiton’s $40bn offer for Potash Corp and it now appears that ChemChina has succeeded in its attempts to secure a 60% stake in Makhteshim Agan, the world’s largest generic agrochemicals group, for $2.4bn. Having failed in 2008 with its bid to acquire Nufarm Ltd, the Australian generic agrochemicals producer, ChemChina is keen to flex it muscles as the second largest Chinese chemicals group. Makhteshim has a 5% market share in the global crop protection chemicals market and will see huge opportunities for its fungicides, herbicides and insecticides in the Chinese market. Earlier in 2010 the company walked away from a deal to acquire Albuagh Inc, a US supplier of crop chemicals, for $1bn.

In August 2010, Clearwater Corporate Finance completed the sale of Irish generic agrochemicals supplier Agriguard Ltd to Mitsui AgriScience International Ltd.

Deals

DSM NV has acquired a 51% stake in AGI Corp, a Taiwanese manufacturer of environmentally-friendly ultraviolet curable resins. The transaction will allow DSM Resins to strengthen its UV technology platform for paints and inks that have a low eco-footprint in combination with low operational costs. At the same time, DSM has acquired Martek Biosciences Corp, a US producer of products from microbial sources used in healthcare and nutritional applications. The $1bn acquisition is part of the Dutch group’s strategy of refocusing on life sciences and materials sciences.

Christeyns SA has acquired Alcal SA, a French manufacturer of detergents and hygiene chemicals for the food industry. Christeyns is a Belgian manufacturer of detergents and washing powders.

Camlin Fine Chemicals Ltd has acquired Borregaard Italia Srl, a subsidiary of Borregaard Industries ASA. The acquisition is part of the Indian group’s backward integration strategy as Borregaard Italia is a manufacturer of hydroquinone, a key raw material used by Camlin for the production of food antioxidants.

Tata Chemicals Ltd has acquired British Salt Ltd, a UK manufacturer of pure dried vacuum salt, for $144m. Tata has completed the acquisition via its Brunner Mond subsidiary, a UK producer of soda ash, which will be able to secure its supplies of brine for the long term as a result of the transaction.

AkzoNobel NV has acquired East Asiatic plc’s(EAC) minority stake in Akzo Nobel Paints (Thailand) Ltd for $38m. EAC’s investment in Akzo Nobel Paints (Thailand) was historically related to the activities of EAC Industrial Ingredients Ltd in Thailand which were sold to Brenntag AG in July 2010. At the same time, AkzoNobel has acquired its joint venture partner’s stake in Comex SA, a Mexican distributor of AkzoNobel car refinishing products including Lesonal, Sikkens, U-Tech and Wanda. The acquisition will give AkzoNobel full control over the marketing of its products in the fast growing Mexican market.

Lanxess AG has acquired the Elastomers division of DSM NV for $400m. DSM Elastomers produces the synthetic rubber ethylene propylene diene monomer (EPDM) under the brand name Keltan. EPDM is used in applications in the automotive, cable and wire, construction, oil additives and plastics industries.

Bain Capital has acquired IMCD NV, a Dutch distributor of speciality chemicals for $850m. The transaction will allow IMCD to continue its global expansion following its August 2010 acquisition of the speciality chemical distribution business of Warwick International Group Ltd. The deal provides an exit for AAC Capital which acquired IMCD in September 2005.

Cepsa SA has acquired La Seda de Barcelona SA’s Artenius San Roque PET plant. The transaction will expand the polyester value chain of Cepsa’s petrochemicals business, Cepsa Química, and will allow for operations to be restarted at the 175,000 tpa San Roque facility which had been idle since September 2008.

GRI Group Ltd has acquired a majority stake in Libra Chemicals Ltd, a UK manufacturer and distributor of amphoteric, anionic and non-ionic surfactants, phosphate esters and a wide range of speciality chemicals for household care, industrial and personal care applications. The acquisition will complement the UK group’s existing surfactant manufacturing operations at Tensachem NV, its Belgian subsidiary.

China National Chemical Corp has acquired a 60% stake in Makhteshim Agan Industries Ltd, an Israeli manufacturer of generic agricultural chemicals. The $2.4bn transaction will facilitate the on-going global expansion of Makhteshim Agan’s routes to market for its fungicides, herbicides and insecticides.

Novozymes AS has acquired the Crop BioScience business of Merck KGaA for $275m. Merck’s Crop BioScience business focuses on the development and commercialisation of technologies that improve plant health and crop yields.

Sumitomo Chemical Co has acquired New Chemi Industries Ltd, an Indian manufacturer of agrochemicals. The acquisition will complement Sumitomo Chemical’s existing Indian operations and expand its range of crop protection chemicals.

Ricardo Molina SA has acquired Barcelona-based Nutritec SA, a supplier of additives for the food and drink industry. Ricardo Molina is a privately-owned Spanish importer and distributor of speciality chemicals and additives.

Rhodia SA has acquired PI Polymer Ltd, an Indian manufacturer of polyamide compounds. The $13m acquisition will reinforce the French group’s presence in the Indian engineered plastics market where it hopes to achieve a 15% market share by 2015.

Yule Catto & Co plc has acquired PolymerLatex GmbH, a German manufacturer of emulsion polymer products. The $575m transaction will offer Yule Catto access to PolymerLatex’s European latex manufacturing operations, as well the target’s purpose-built nitrile latex facility in Malaysia. The transaction provides an exit for TowerBrook Capital Partners.

Mexichem SAB de CV has acquired AlphaGary Corp from Rockwood Holdings Inc for $300m. AlphaGary is a manufacturer of compounds such as halogen-free alloys, flexible PVC, halogen-free alloys, nylon alloys, cross-linkable polyethylene, polyurethane blends and thermoplastic elastomers for applications such as automotive components, building materials, closure sealants, communications cables, consumer products and disposable medical devices.

Arsenal Capital Partners has acquired Royal Adhesives and Sealants LLC a US manufacturer of bonding, laminating and sealing chemicals for aerospace and defence, automotive, construction, industrial and specialty packaging applications. The target specialises in thermosetting epoxy and urethane products for demanding adhesive and sealant applications. The transaction created an Adhesives Sealants and Coatings platform to which the US private equity firm has added Para-Chem Southern Inc, a US manufacturer of adhesives, coatings, polymers, surfactants and thickeners for carpeting, construction, household, industrial, institutional, military, packaging, paper, personal care, and textile applications.

Israel Chemicals Ltd has acquired the Scotts’ Global Professional business (SGP) from Scotts Miracle-Gro Co for $270 million. SGP is a supplier of specialty fertilisers, horticultural and turf speciality products which will enhance Israel Chemical’s range of products for commercial nurseries, greenhouses and speciality crop growers in the Americas, Australia, Europe and the Far East. SGP specialises in controlled-release fertilisers, slow release fertilisers, water-soluble fertilisers, grass seeds, growing media, plant protection products and wetting agents.

Indorama Ventures plc has acquired a number of PET manufacturing operations from SK Chemicals Co Ltd. The transaction includes the PET business of SK Eurochem Spzoo and the PET and polyester business of PT SK Keris and PT SK Fiber. SK Eurochem is Polish manufacturer of PET chips with a capacity of 140,000 tons per annum. PT SK Keris, an Indonesian PET chips manufacturing operation, and the associated polyester filament yarn manufacturing facility have a combined capacity of 160,000 tons per annum.

Arkema has acquired the photocure and coatings resins businesses of Total SA for $720m. The acquired businesses include Cray Valley and Cook Composites & Polymers coatings resins business and Sartomer’s photocure resins business which will strengthen Arkema’s activities in the acrylics sector.

Yunnan Salt & Chemical Industry Co Ltd has acquired a 22.5% stake in Yunnan Tiannanye Chemical Co Ltd, a Chinese producer of chlorine, lime and sodium hydroxide products, from Yunnan Phosphorus Group Co Ltd. Yunnan Salt & Chemical now holds a 70% stake in Yunnan Tiannanye Chemical.