Chemicals sector comment – May 2010

Date

As expected BASF and Cognis are close to reaching an agreement whereby the German behemoth will acquire its smaller compatriot for around $4bn, making the transaction the largest in the chemicals industry this year.

The acquisition of Cognis will boost BASF’s range of cosmetic and detergent chemicals at a time when the group is expecting a recovery in consumer goods markets. The group sees huge value in selling these products through its existing sales channels.

The Cognis transaction is the latest in BASF’s line of mega-deals aimed at propelling the group to the position of outright global leader, by revenues at least. Its $3bn acquisition of Ciba occurred less than two years ago following its acquisitions of US catalyst developer Engelhard Corp for $5bn and Degussa’s construction chemicals division for $2.6bn, both in 2006.

The acquisition of Cognis will signal the departure of BASF’s CEO Juergen Hambrecht. He is expected to leave in May 2011 and will be replaced by Kurt Bock, the group’s CFO. Hambrecht will leave Bock with the target of achieving sales of EUR 90bn by 2020 meaning that once he has integrated Cognis, Bock may well need to set about the next acquisition target, with Clariant a possible candidate. Bock’s appointment will see a departure from the group’s traditional approach of appointing a chemist as its leader, although as an insider Bock has considerable experience of BASF’s approach to acquisitions. He will also need to progress with the sale of the group’s non-core styrenics business at the time when US private equity firm Bain Capital is expected to close on the $1.6bn acquisition of Dow’s Styron division.

Deals

Sherwin-Williams Co has acquired Becker Acroma Industrial Wood Coatings AB, a subsidiary of Wilhelm Becker AB. Becker Acroma is a Swedish manufacturer of industrial wood coatings including UV and water coatings for flooring, furniture, kitchen cabinet and joinery markets. It operates 9 manufacturing facilities, 19 mixing sites and 13 technical centers around the world.

EL Dupont de Nemours & Co has acquired a 10% stake in Changshu 3F Fluorochemical Industry Co Ltd. DuPont established a strategic partnership with Changshu 3F eight years ago and the investment in the Chinese company will allow Dupont to benefit from the growing demand for fluorochemicals in emerging markets.

Astra Industrial Group Ltd has acquired Constab Middle East Polimer AS, a Turkish manufacturer of mastebatches. With this acquisition the Saudi Arabian group’s plastics division will enhance its expertise in masterbatch production and expand into Central Asian and Eastern European markets.

Kuala Lumpur Kepong Bhd (KLK) has acquired Croda International plc‘s plant in Emmerich, Germany. The transaction completes Croda’s restructuring programme following the group’s acquisition of Uniqema Ltd from ICI plc in 2006. The Emmerich facility manufactures oleochemicals such as fatty acids and glycerine.

Orrion Chimie SA has acquired the Rohm and Haas facility in Loiret, France from Dow Chemical Co. The plant specialises in the production of adhesives and glues for the automotive industry.

Sika AG has acquired a majority stake in Dyflex HD Co Ltd, a Japanese manufacturer of liquid waterproofing chemicals. The acquisition enables Sika to expand its range of products for the Japanese construction chemicals market and cross-sell Dyflex’s products through the Swiss group’s global sales network.

EMS Chemie Holding AG has acquired full control of EFTEC Asia Pte Ltd from Nittoku Engineering Co Ltd. EFTEC is a Singapore-based developer and manufacturer of bonding, coating, sealing and sound damping chemicals for the automotive industry. EMS Chemie acquired HB Fuller Inc’s 20% stake in EFTEC in 2007 and has now acquired the remaining 20% stake from Nittoku.

Celanese Corp has acquired the Zenite liquid crystal polymer and Thermx polycyclohexylene-dimethylene terephthalate divisions of EL Dupont de Nemours & Co. The acquisitions will be integrated into Celanese’s Advanced Engineered Materials division which includes the Ticona specialty resins business. The acquisition will strengthen Ticona’s liquid crystal polymer product portfolio and enable it to offer additional environmentally friendly electrical and electronics product solutions, particularly for high-temperature applications in the automotive and electronics industries. Zenite LCP is used in a broad range of components for aerospace systems, automotive ignition and fuel systems, electrical and electronic products, lighting and telecommunications equipment.

Penrite Holdings Pty Ltd has acquired Forest Lubricants Ltd, a UK manufacturer of industrial lubricants. With the acquisition Penrite Oil expands its global distribution operations and reinforces its position as a manufacturer of oil and lubrication products in the Australian automotive industry.

Lanxess AG has invested $10m in Gevo Inc as part of a co-operation agreement between the two companies to produce isobutene from renewable resources. Gevo is a US developer of biochemical and biofuel products including renewable hydrocarbon feedstocks that have applications in a variety of chemical applications. Other investors in Gevo include Total SA and the Virgin Green Fund.

Cheminova AS has acquired the dimethoate sales operations of Isagro SpA. The EUR 9.7m acquisition will enhance the Danish group’s range of insectides.

Boliden AB has acquired Kemira Oy‘s sulfuric acid plant in Kokkola, Finland. The transaction is part of Kemira’s restructuring efforts and strategy of focusing on its core water-intensive industrial chemicals.

Hansa Group AG has acquired Luhns GmbH, a German manufacturer of cosmetics, detergents and pharmaceuticals. Luhns specialises in the development and production of household, laundry and personal care products on behalf of retail brands.

Vertellus Specialties Inc has acquired certain assets of the insect repellent business of McLaughlin Gormley King Co. The acquisition does not include any physical facility assets or personnel and will enhance Vertullus’ range of pesticide chemicals.

Air Liquide SA has acquired Oxea AG’s synthesis gas (syngas) plant in Oberhausen, Germany. The companies have also entered into a contract that will secure the long-term procurement of syngas and hydrogen for Oxea. The transaction also enables Oxes to focus on developing its product portfolio in oxo-derivatives.

Air Products and Chemicals Inc has acquired a 51.5% stake in SAGA Group SA, a French manufacturer of industrial gases. SAGA specialises in liquid bulk, medical and packaged gases through its SAGA, SAGA Medical and SAGA Technologies divisions. The initial stake was acquired for $47.2m with the remaining shares expected to be acquired by Air Products by November 2010 for $61m under a put and call option.