Chemicals sector comment – March 2010

Date

Reliance Industries has finally hit the buffers in its $14.5bn pursuit of LyondellBasell.

The stumbling block has been Reliance’s insistence on having effective governance and shareholder control despite only planning to hold a minority of LyondellBasell’s equity. It would also appear that with LyondellBasell poised shortly to be in a position to exit from Chapter 11 proceedings, the Reliance proposal given no firm commitment to executing the deal based on the basis of its projected profits for LydondellBasell. The US group’s creditors have therefore decided that the reorganisation plan should be pursued. It has secured $3.25bn worth of funds and court approval for its bankruptcy-exit restructuring plan. The group plans to sell senior secured bonds on a private placement basis and borrow through a senior term loan. It also plans to raise $2.8 billion in a rights offering. Having reportedly missed out on the acquisition by $700m, the Indian giant controlled by billionaire Mukesh Ambani is left without the mega-deal that it has been craving. It was recently beaten by BP in its attempt to acquire a stake in Canadian oilsands group Value Creation and missed out on GE Plastics when the unit was acquired by Sabic in 2007. The group’s next overseas foray is likely to involve North American shale gas assets which are likely to revolutionize the cost competitiveness of US chemicals production in the coming years.

Deals

Carus Corp has acquired Alexander Chemical Corp, a US manufacturer of water purification chemicals. The acquisition expands Carus’ product portfolio for the drinking water sector in North America and will complement Carus’ existing range of products for the municipal water market.

Altana AG has acquired Aquaprint GmbH, a German manufacturer of coatings for in-mold labels and water-borne overprint varnishes for the packaging and paper industries.Aquaprint will be integrated into the group’s Actega Coatings & Sealants division where it will strengthen Actega’s range coatings and printing inks for graphic art, packaging and printing applications.

Evonik AG has acquired the higher methacrylates business of Arkema SA. The business is a manufacturer of monomers used in the production of coatings, paints and water treatment products. The business is a manufacturer of monomers used in the production of coatings, paints and water treatment products. Evonik has also acquired Membrane Extraction Technology Ltd (MET), a UK developer of chemical separation solutions. The $6m transaction will see MET’s patented membrane technologies for fine chemicals and pharmaceuticals added to Evonik’s range of high-performance polymers business.

RPM International Inc has acquired Chemtec Chemicals BV, a Dutch manufacturer of industrial cleaning chemicals and specialty coatings. The acquisition will be integrated into RPM’s Rust-Oleum subsidiary.

Charterhouse Capital Partners has backed the $500m buyout of Deb Group Ltd, a UK manufacturer of cleaning and hygiene products for the automotive, commercial, industrial and medical sectors. The transaction provides an exit for Barclays Private Equity, a UK private equity firm.

Orascom Construction Industries Ltd has acquired the DSM Agro and DSM Melamine divisions of DSM NV for $420m. The transaction will allow OCI’s Fertilizer division to expand its customer base in key European markets and offer a wider range of products including ammonia, ammonium sulphate, calcium ammonium nitrate, urea and urea ammonium nitrate. The deal is part of DSM’s Vision 2010 strategy of focusing on its life sciences and materials sciences divisions. A joint-venture formed by Indorama plc and Ottana Energia Srl has acquired the purified terepththalic acid (PTA) and polyethylene terephthalate (PET) production units of Equipolymers GmbH. Based in Ottana, Italy the acquired business produces PTA as raw material and PET for in the beverage bottle and packaging industries. Equipolymers is a joint-venture between Dow Chemical Co and Petroleum Industries Co. At the same time DSM has sold DSM Food Specialties BV, a Dutch developer of dietary supplements under the LAFTI brand, to Institut Rosell-Lallemand Inc.

Eastman Chemical Co has acquired Genovique Specialties Corp, a US manufacturer of specialty plasticizers with operations in North America and China. The acquisition will give Eastman’s Performance Chemicals and Intermediates division a significant presence in the market for non-phthalate plasticizers and expand its range of additives for the cement, concrete and plastics markets. The transaction provides an exit for Arsenal Capital Partners, a US private equity firm.

Cambrex Corp has acquired IEP GmbH, a German developer and producer of industrial biocatalytic enzymes for the pharmaceutical industry. IEP’s bioreduction technologies will be integrated into Cambrex’s existing chiral chemistry offering and will allow the US group to offer a broad biocatalysis platform to the pharmaceutical industry.

Brenntag AG has acquired Metausel SA, a French distributor of industrial chemicals for the construction, food, pharmaceuticals, surface treatment and water treatment sectors. The acquisition reinforces the newly-listed German group’s presence in the Alsace-Lorraine region of France.