Chemicals sector comment – February 2011

Date

In yet another buoyant month for M&A activity in the chemicals industry, Aditya Birla’s acquisition of Columbian Chemicals, China National Bluestar’s acquisition of Elkem and DuPont’s acquisition of Danisco where just a number of notable transactions.

Two significant transactions have completed in the last month. Mario Hugo Azulay & Asociados advised on the sale of Darmex, a manufacturer of release agents for the rubber industry. The transaction was completed by Lanxess thanks to an introduction from M&A Consultants AG. The acquisition will significantly enhance the German group’s presence in the South American market and offers its Rhein Chemie division the opportunity to position itself as a supplier of both release agents and rubber bladder technology for the tyre industry. The demand for these products is expected to accelerate in parallel to growing vehicle production in countries such as Brazil, China and India.

Meanwhile, Morgan Joseph in the US has completed a $60m fundraising for Myriant Technologies LLC. The company specialised in the utilisation of proprietary technology for the development of low-cost cellulosic sugars for the sustainable commercialisation of high-value specialty chemicals. Morgan Joseph sourced the equity investment for Myriant from PTT Chemical Co Ltd of Thailand, a diversified producer of petrochemicals and subsidiary of PTT Co Ltd. The strategic financing and associated joint-venture in Asia will support Myriant’s continued growth and innovation in making high-performing renewable chemicals available on a world scale basis including the expansion and creation of biochemical plants in North America and Asia.

Deals

Euticals Group SpA has acquired Archimica Group SpA, an Italian manufacturer of fine chemicals. Euticals is an Italian manufacturer of active pharmaceutical ingredients backed by Italian private equity firm Mandarin Capital Partners. The acquisition will more than double the revenues of Euticals and provide it with additional manufacturing capacity in France, Germany, Italy, the UK and the USA. The transaction provides an exit for TowerBrook Capital Partners.

Perstorp Holding AB has acquired the Hercules pentaerythritol business of Ashland Inc. The unit is a developer of pentaerythritol used in the production of alkyd resins, olefin antioxidants, PVC stabilisers and varnishes. The acquisition will be integrated into Perstorp’s Polyols division, whilst Ashland will purchase pentaerythritol from Perstorp as a raw material for its continuing synthetic lubricants production.

Curtiss-Wright Corp has acquired the Surface Technologies business of BASF SE. The Surface Technologies unit of BASF is a supplier of ceramic and metallic thermal spray coatings primarily for the aerospace and power generation industries with a particular focus on flame spray; high velocity oxygen fuel and plasma spray coatings. The business will be integrated into Curtiss-Wright’s Metal Treatment division where it will complement the group’s range of coatings that provide abrasion and erosion resistance, corrosion resistance and thermal barrier protection for critical components.

Evonik AG has acquired the Resomer division of Boehringer Ingelheim Pharma GmbH. Resomer is a developer and manufacturer of polymers used in medical devices and pharmaceutical formulations that are fully biodegradable in the body. The acquisition of this business will complement Evonik’s EUDRAGIT business which is a producer of functional excipients for oral dosage forms.

Aditya Birla Group Ltd has acquired Columbian Chemicals Co, a US manufacturer of carbon black. The $875m acquisition will create one of the largest global suppliers of carbon black for the conveyor belts, paints, printing inks and tyre production markets. The transaction provides an exit for US private equity firm One Equity Partners which acquired Columbian Chemicals jointly with DC Chemical Co of South Korea for $600m from Phelps Dodge Corp in 2006. One Equity Partners subsequently acquired DC Chemical’s 67% stake in Columbian Chemicals for $150m in January 2009. The acquisition by Aditya Birla follows the Indian group’s acquisition of a further 12% stake in Alexandria Carbon Black Co SAE from Arab Petroleum Investments Corp in a transaction which took its holding in the Egyptian manufacturer of carbon black to 60%. Aditya Birla’s acquisition of Columbian Chemicals comes at a time when Evonik AG is actively seeking a sale of its own carbon black manufacturing operations which have been strongly linked with Philips Carbon Black Ltd, itself part of RPG Group Ltd of India.

Rogers Corp has acquired Curamik Electronics GmbH, a German manufacturer of power electronic substrate products. Curamik Electronics specialises in direct copper bonded ceramic substrate products used in the design of intelligent power management devices for hybrid electric vehicles, industrial motor drives, solar power systems and wind power equipment. The acquisition will be integrated into Rogers’ Power Distribution Systems and Thermal Management Solutions division where it will complement the US group’s current focus on the mass transit, sustainable energy and wireless communications markets.

US private equity firm HIG Capital has acquired the Building Block Chemicals division of Cytec Industries Inc for $180m. The division is a manufacturer of acrylonitrile, melamine and sulfuric acid. The transaction allows Cytec to exit from one of its more volatile businesses whilst retaining a supply of both melamine for its melamine resins and acrylonitrile used in its production of carbon fibre. For HIG Capital this represents its third North American acquisition in the chemicals industry in as many year following its previous acquisitions of the North American oleochemicals business of Croda International plc, now called Vantage Specialty Chemicals Inc, and surfactants manufacturer Petroferm Inc.

DuPont de Nemours Co has acquired Danisco AS, a Danish developer and manufacturer of enzymes and speciality food ingredients such as cultures, enablers and sweeteners. Danisco’s biotechnology-led product development will complement DuPont’s existing capabilities for the integration of renewable materials into food production and the reduction of fossil fuel consumption. The $6.3bn acquisition will realise synergies with the US group’s Applied BioSciences and Nutrition & Health divisions. The two groups already operated a joint-venture for the development of cellulosic ethanol technology.

Lanxess AG has acquired Darmex SA, an Argentine manufacturer of curing bladders and release agents for the rubber industry. The acquisition will allow the German group’s Rhein Chemie division to significantly enhance its presence in South America and reinforce its presence in the tyre production market.

Frutarom Industries Ltd has acquired East Anglian Food Ingredients Ltd (EAFI), a UK developer and manufacturer of savoury flavourings. EAFI has a particular focus on seasoning compounds and functional ingredients for the convenience food, processed food and snack food sectors.

Univar NV has acquired Eral-Protek AS, a Turkish chemicals distributor with a particular focus on products for the coatings, composites, construction, plastics and rubber industries. The acquisition will immediately give Univar a notable cultural and logistical bridge into the fast growing markets in the Middle East and North Africa. Significantly, the Dutch group will be able to integrate Eral-Protek into the Istanbul and Izmir operations of Basic Chemical Solutions LLC which it acquired in October 2010.

Kem AG has acquired Quaron France SA from Eurochem BV. The transaction completes Eurochem’s sale of its distribution business following the sale of the operations in the Benelux region to Univar NV in February 2010. Kem is a newly-formed joint-venture between Overlack AG and Stockmeier Holding GmbH.

Azelis SA has acquired Finkochem doo, a Serbian distributor of speciality chemicals for the detergents, food, household products, metallurgy, plastics and rubber industries. The acquisition will allow Azelis to accelerate the growth of its food, healthcare and personal care activities in Serbia, as well as adjacent countries in Eastern Europe and the Mediterranean region.

US private equity firm Geneva Glen Capital has acquired Flow Polymers Inc, a US manufacturer of proprietary chemical dispersions, homogenising agents and process aids for the automotive, cable and wire, industrial products, plastics, pharmaceuticals and tyre industries. The transaction will allow Flow Polymers to launch its new products for the plastics and rubber markets and accelerate the company’s expansion into emerging, growth geographies. The company also intends to target complementary acquisitions.

Sumitomo Chemical Co Ltd has acquired the remaining 50% in Isagro Italia Srl from Isagro SpA. Isagro Italia is an Italian distributor of agrochemicals which had operated as a joint-venture between the two groups since 2002. Sumitomo Chemical will rebrand the business as Sumitomo Chemical Italia Srl as part of its strategy of reinforcing its presence in the European agrochemicals market. The transaction will allow Isagro to focus on its core research and development activities in the crop chemicals market.

Altana AG has acquired Kometra Kunststoff-Modifikatoren und Additiv GmbH, a German producer of polymer modifiers. Kometra specialises in surface-active copolymers which are used as adhesion promoters and impact modifiers in a range of applications. The acquisition will be integrated into Altana’s BYK Additives & Instruments division where it will be able to utilise BYK’s global sales network for the supply of its polymer modifier technology worldwide.

Brenntag AG has acquired the chemicals distribution activities of Luwatec GmbH. The acquisition expands Brenntag’s product portfolio for the German industrial and municipal water and wastewater treatment sectors.

Pinova Holdings Inc has acquired the flavours and fragrances business of LyondellBasell Industries Inc. Pinova has paid $150m for the business which focuses on the production of terpene-based flavour and fragrance ingredients for the beverage, confectionery and oral care markets. The acquired company will be renamed Renessenz LLC.

Harima Chemicals Inc has acquired the Global Ink & Adhesive Resins (IAR) business of Momentive Specialty Chemicals Inc. IAR is manufacturer of additives and resins for the adhesives, aroma chemical, coatings, graphics arts and synthetic rubber industries which will complement the Japanese group’s range of pine-based products for environmentally sustainable applications.

PTT Chemical Co Ltd has made a $60m equity investment in Myriant Technologies LLC, a developer of proprietary technologies for the production of low-cost cellulosic sugars for the sustainable commercialisation of high-value specialty chemicals. The transaction will facilitate the construction of biochemical plants in Asia and North America.

Wilhelm Wilhelmsen ASA has acquired the Nalfleet marine chemicals unit of Nalco Holding Co. The $41m acquisition will be integrated into Wilhelmsen’s Ship Services unit, whilst Nalco will be able to focus on its core industrial water and process treatment operations.

US private equity firm Caltius Equity Partners has acquired National Industrial Coatings Inc (NIC), a US developer and manufacturer of customised overprint coatings for graphic arts, flexible packaging and speciality coating applications. The transaction will allow NIC to accelerate its expansion in Latin America markets.

French private equity firm AXA Private Equity has acquired a majority stake in Novacap SA, a French producer of mineral and organic chemicals. Novacap markets its products to a diverse range of industries including animal feed, automotive, beverage glass packaging, construction, detergents, energy, flat glass, pharmaceuticals and water treatment sectors. The transaction provides an exit for Bain Capital which created Novacap in January 2003 when it acquired some of the intermediate chemicals and industrial mining activities of Rhodia SA.

China National Bluestar Group Co Ltd has acquired Elkem ASA from Orkla ASA for $2bn. The transaction includes Elkem’s carbon, foundry chemicals, silicone materials and solar materials operations. It will enhance Bluestar’s competitive position in the silicones industry and broaden its footprint in adjacent markets. Furthermore, Elkem’s solar-grade silicone materials will provide an energy-efficient and environmentally-friendly solution for the Chinese energy management market. The transaction also complements Bluestar’s acquisition of the Silicones division of Rhodia SA in October 2006.

WR Grace & Co has acquired RS Solutions LLC, a US manufacturer of process control solutions for the ready mix concrete industry. RS Solutions’ range of products includes electro-mechanical devices, sensors and other technologies that assist concrete producers in controlling product quality and production costs. The acquisition will be integrated into Grace Construction Products where it will offer the unit a proprietary, integrated chemical control, material science and measurement solution for concrete production.

Quaker Chemical Corphas acquired Summit Lubricants Inc, a US manufacturer of speciality greases and lubricants. The $30m acquisition will expand Quaker Chemical’s range of proprietary formulations.

Rhodia SA has acquired the Guar Derivatives unit of Suzhou HiPro Polymers Co Ltd. The acquisition will complement Rhodia’s existing worldwide guar derivatives manufacturing operations and allow the French to group to meet the growing demand for guar-based products in the agrochemical, oilfield and personal care sectors. Guar gum, a polysaccharide, is used for its biocompatible, gelatinous and natural properties in these industries. This latest acquisition will be complemented by an expansion of Rhodia’s guar derivatives production capacity at its plant in Vernon, Texas.

Hawkins Inc has acquired Vertex Chemical Corp, a US manufacturer of sodium hypochlorite bleach. The acquisition provides Hawkins with an expanded geographic footprint and additional infrastructure to support the growth of its water treatment unit.

Yara International ASA has acquired the remaining 60% stake in Yara Nipro Pty Ltd, an Australian supplier of bulk liquid fertilisers. The acquisition will reinforce Yara’s presence in the crop nutrition market in Australia with a particular focus on horticulture, sugar cane and wheat.