Transactions in Chemicals focused on paints and coatings and plastics.
US and China remain the most active countries. Japanese companies were more active and participated in some large deals.
KPMG’s Deal Thermometer indicates that the environment for M&A activity will remain moderately strong in chemicals.
Deal focus areas
While the total number of completed deals remained stable, the deal value slightly decreased in Q1 2017 versus Q1 2016. However, landmark announced deals from 2016 are yet to close and one newly announced deal broke the $20 billion mark. US and China remain the most active countries.
Chemical players were particularly active in the areas of paints and coatings and plastics.
Paints and coatings
Consolidation in paints and coatings continues, following the announced $11.3 billion acquisition of The Valspar Corp. by Sherwin-Williams Co., dating back to March 2016. In Q1 2017, the deadline for its merger agreement has been prolonged to the end of June 2017.
PPG Industries Inc. made a bid for AkzoNobel NV, a global leader in paints, coatings and specialty chemicals. PPG topped its first proposal from 28 February 2017 by €7 to €90 per share (cum dividend), now offering €24.5 billion in total. Akzo has twice rejected the offer. PPG acquired the North American license to Akzo’s Dulux and Sikkens brands through its acquisition of the North American decorative coatings business for $1.1 billion in 2013. PPG expects annual run rate synergies of $750 million in the course of combining the two firms.
Japan-based Nippon Paint Holdings Co., Ltd., the fourth largest paint company worldwide, acquired Dunn-Edwards Corp. for $0.6 billion, enforcing its goal to become a global paint major. So far, Nippon has focused on automotive coatings in the US. The deal now develops its architectural paints business in the region.
Henkel AG & Co. KGaA made a $1.1 billion offer for GCP Applied Technologies Inc.’s packaging technologies business, Darex Packaging Technologies, a leading maker of sealants for beverage, food and aerosol cans. The transaction strengthens Henkel’s leading position in the adhesive technologies business and brings with it a global customer base.
Last year already witnessed keen interest in the plastics industry with Westlake Chemical Corp.’s $3.8 billion acquisition of Axiall Corp. representing the second-largest deal completion in 2016. In Q1 2017, deal activity in plastics added up to more than 15% of completed chemical deals and five transactions in the Top 10 completed list.
CCL Industries Inc., a global top player in specialty label and packaging solutions, led the way by acquiring Innovia Group Ltd. for $0.8 billion. The target is a global leader in specialty biaxially oriented polypropylene (BOPP) films and banknote substrates. It adds complementary competences to CCL’s capabilities in security printing, polymer extrusion and surface engineering.
Berry Plastics Group Inc. acquired AEP Industries Inc. for $0.5 billion, accessing a highly complementary product portfolio. The deal adds more than 15,000 types of multi-purpose and flexible packaging films and 14 manufacturing facilities in USA and Canada. Annual cost synergies of approximately $50 million are expected.
Southeast Asia focus
Asahi Glass Co., Ltd. (AGC) completed the $0.3 billion acquisition of Vinythai PCL, strengthening its position in the Southeast Asian caustic soda and polyvinyl chloride (PVC) market, which AGC expects to grow at around 5% per year. The deal is in alignment with AGC’s growth ambitions in the region, adding production facilities in Thailand, following Indonesia and Vietnam.
By acquiring Peninsula Packaging Company LLC for $230 million, Sonoco Products Co. grows its presence in the packaging segment of fresh food products, complementing its previous focus of frozen and shelf-stable foods packaging.
Stone Canyon Industries LLC (SCI) announced the acquisition of Mauser Group NV for $2.3 billion from Clayton Dubilier & Rice LLC. SCI expands its packaging portfolio by obtaining knowledge in intermediate bulk containers, plastic and fibre packaging. Via its subsidiary BWAY Corp., SCI is already a leader in the manufacturing of rigid metal and plastic containers in North America.
Momentum has continued from Q4 2016 with several PE houses and financial investors showing interest in the sector. Around 27 percent of completed deals has been carried out by financial investors.
Bridgepoint Advisers Group Ltd. acquired Sapec S.A.’s agrochemicals business for $0.5 billion, adding an Iberian market leader in off-patent crop protection and one of the global leaders in crop nutrition with sales in over 70 countries to its portfolio. Bridgepoint aims to leverage the target’s R&D and regulatory capabilities to accelerate revenue growth and geographic expansion in the consolidating agrochemicals market.
Asian investors predominantly conducted domestic M&A. MBK Partners Ltd. announced the $1.8 billion acquisition of Daesung Industrial Gases Co., Ltd., enforcing its investment focus on Greater China, Japan and Korea. An investor group including Wuxi Lianchuang Artificial Intelligence Investment Enterprises LP bought a 30% stake of Jiangsu Youli Investment Holding Co., Ltd. for $0.5 billion.
In Q1 2017, the Bloomberg Asia Pacific Chem Index outperformed the MSCI World Index and other regional indices with a 9.3% growth. One of the key drivers was LG Chem Ltd. with 16.2% growth.