Chemicals sector comment – May 2011

Date

Solvay’s $4.8bn acquisition of Rhodia is the latest high profile transaction in the chemicals industry as the major players position themselves in high growth end markets.

The acquisitions of Cognis by BASF and Lubrizol by Berkshire Hathaway highlight how large chemicals groups are seeking to diversify away from commodity segments and expand their activities in emerging economies. Solvay had reportedly been an under-bidder on DuPont’s recent acquisition of Danisco and has now positioned itself with a more balanced portfolio of products. Its caustic soda, polymer and soda ash businesses are now complemented by Rhodia’s highly engineering plastics, speciality materials for energy applications and surfactants for consumer and personal care applications. Significantly, over 40% of the group’s combined revenues of $18bn will be generated in emerging markets. Having paid 7.3 times Rhodia’s recurring earnings before interest, taxes, depreciation and amortization, Solvay is comfortable that it will be able to double its earnings to $3bn as result of this acquisition.

Deals

UK private equity firm LDC has backed the secondary buy-out of A-Gas International Holdings Ltd for $115m. A-Gas is a UK blender, re-packager and supplier of specialist chemicals and gases for the insulation foam and refrigeration industries in particular.

Mitsui Chemicals Inc has acquired Acomon AG, a Swiss producer of optical lens monomers. As a result of the acquisition Mitsui Chemicals will strengthen its optical lens materials business with the addition of low-index to high-index lenses. The transaction provides an exit for German private equity firm Auctus Capital Partners.

PetroChoice Inc has acquired Anderson Lubricants Inc, a US distributor of lubricants. Anderson Lubricants will serve as the foundation for PetroChoice’s expansion into the US Midwest. PetroChoice is backed by US private equity firm KRG Capital Partners.

Pipelife International GmbH has acquired the French operations of Alphacan SA, a subsidiary of Arkema SA. Alphacan is a producer of PVC pipes for the building and infrastructure markets. The transaction is part of Arkema’s strategy of rationalising its vinyl products portfolio. Pipelife Group is a producer of plastic pipes and a joint-venture between Solvay SA and Wienerberger AG.

Makhteshim Agan Industries Ltd has acquired the non-mixture diuron business of EI du Pont de Nemours & Co. The unit, which forms part of DuPont’s Crop Protection division, is a developer of diuron herbicides including its DuPont Direx and Karmex brands used in agricultural, industrial and vegetation management applications to control broadleaf and grassy weeds. The acquisition will expand Makhteshim Agan’s product offering in the Asia Pacific region, Brazil and North America.

US private equity firm Rhone Capital has acquired the Carbon Black division of Evonik Industries AG for $1.3bn. The transaction closely follows the recent acquisition of US carbon black manufacturer Columbian Chemicals Co by Aditya Birla Group Ltd for $900m. The deal will allow Evonik to focus on its core speciality chemicals activities in advance of its expected initial public offering.

Koch Industries Inc has acquired the Nitamin and Nitamin Nfusion fertiliser units of Georgia-Pacific Chemicals LLC. The acquired businesses are producers of slow-release foliar and soil-applied nitrogen fertilisers that will enhance the product portfolio of Koch’s Agronomic Services division.

Evonik Industries AG has acquired Hanse Chemie AG, a German manufacturer of epoxy modifiers and silicone products. The acquisition will allow Evonik to penetrate the market for speciality silicone materials used in adhesives, castings, moulds and sealants. Hanse Chemie’s products are used in applications in the automotive, construction, dental technology and solar equipment sectors. The company’s silicate-based nanomaterials are used in specialist adhesives, coatings, embedding materials and fibre composites.

BASF has acquired Inge Watertechnologies AG, a German developer and producer of ultrafiltration membranes used in the treatment of drinking water, process water, sea water and wastewater. The transaction marks BASF’s entry into the market for ultrafiltration membranes in order to complement its production of water treatment chemicals such as organic coagulants and flocculants.

Aditya Birla Group Ltd has acquired the Chloro Chem division of Kanoria Chemicals & Industries Ltd for $190m. The unit is a manufacturer of chlor-alkalis, chlorine derivatives and water treatment chemicals which will more than double Aditya Birla’s capacity for caustic soda production.

Huntsman Corp has acquired the chemicals unit of Laffans Petrochemicals Ltd. The transaction includes the Laffans ethylene oxide derivatives facility in Ankleshwar, Gujarat, which produces speciality intermediates for the agrochemicals, automotive lubricants, household products, oil and gas and personal care markets.

HB Fuller Co has acquired Liquid Polymer Corp, a US manufacturer of adhesives trading under the Liquamelt brand name. Liquid Polymer is a US producer of speciality packaging adhesives with room temperature handling and storage capabilities.

Zotefoams plc has acquired the remaining 70% stake in MuCell Extrusion LLC for $7.5m. MuCell Extrusion is a US developer of microcellular foam extrusion technology in which Zotefoams originally acquired a 30% stake of $3m in May 2009. Zotefoams is a UK-listed manufacturer of high performance foams.

Clariant AG has acquired Prairie Petro-Chem Ltd, a Canadian supplier of oilfield chemicals and provider of related oilfield engineering services. The acquisition will be integrated into Clariant’s Oil Services division where it will enhance the unit’s presence in the Bakkan Shale region in North America.

Henkel KGaA has acquired the remaining 50% stake in Purbond AG, a Swiss producer of polyurethane adhesives for load-bearing timber structures. The transaction provides an exit for Collano AG and follows Henkel’s 2008 acquisition of the adhesives business of National Starch & Chemical Co.

Solvay SA has acquired Rhodia SA, a French manufacture of speciality chemicals. The $4.8bn transaction will see Solvay’s hydrogen peroxide, polymers and soda ash production activities complemented by the addition of Rhodia’s speciality materials and surfactant product ranges. At the same time, Novacap SA has acquired the acetaminiphen and salicylic acid businesses of Rhodia SA. The France-based units produce active ingredients and synthesis intermediates for the pharmaceutical industry. The transaction marks Rhodia’s exit from pharmaceutical chemistry.

Poliya Composite Resins and Polymers Inc has acquired the Cam Elyaf resins unit of Şişecam Group AS. Cam Elyaf is a producer of composite resins for the energy, pipeline and transportation infrastructure sectors which will offer the Turkish group the largest production capacity in the EMEA region.

Bertolini Group SpA has acquired the Torviscosa plant of Caffaro Chimica Srl, a subsidiary of bankrupt Italian group SNIA SpA. The facility is a contract manufacturer of fine chemicals.

Lanxess AG has acquired the Santoweb and Vocol businesses of Solutia Inc. The acquired units will be integrated into Rhein Chemie Rheinau GmbH, a subsidiary of Lanxess, and strengthen the German group’s expertise in dithiophosphate accelerators and pre-dispersed polymer-bound fibres for the rubber processing industry.