Downstream specialty chemicals was the leading focus area, notably in applications, resins and agrochemicals. KPMG’s Deal Thermometer indicates that the environment for M&A activity will remain moderately strong in chemicals.
Chemical deals in Q1 2016 were mainly focused on downstream specialty chemicals, such as application-oriented businesses, resins and agrochemicals. The value of the top 10 announced deals topped $62 billion due to ChemChina’s bid for Syngenta. The US followed by Germany and China are the most active countries.
In Q1 2016, chemical companies were interested in application-oriented investments with a special focus on the coatings and paintings sector.
The Sherwin-Williams Company announced the acquisition of US-rival Valspar Corporation for $11.3 billion, creating a global market-leader for paints and coatings with combined revenues of $15.6 billion. Both companies offer complementary products which will enhance market positions in the sector. Additionally, annual synergies of up to $0.3 billion are expected.
BASF SE announced the sale of its industrial coating business to Netherlands-based AkzoNobel N.V. for $0.5 billion, enabling AkzoNobel to boost its market-leading position for industrial coatings.
Chemical companies pursued investments in other application-oriented segments as well. Kraton Performance Polymers, Inc. closed its $1.4 billion acquisition of Arizona Chemical Holdings Corp., a producer of pine-based specialty chemicals. Kraton enlarges its portfolio with Arizona’s complementary products to offer a broad range of highly engineered polymers and specialty chemicals for everyday products.
GAF Corp., North America’s largest roofing manufacturer, seeks to acquire Danish Icopal S/A, a European market leader for roofing products and waterproofing solutions, from Investcorp Ltd., an alternative investments firm. Icopal is in particular renowned for its modified bitumen membranes. The deal, worth $1.1 billion, is expected to create the sector‘s leading company under the umbrella of GAF’s parent company, Standard Industries Inc. Global sales are projected to reach around $4 billion.
The acquisition of Pinova Holdings, Inc. by Symrise AG provides the German company with access to Pinova’s complementary ingredients for fragrances, perfumes and oral care products, thereby strengthening the competitiveness of Symrise’s Scent & Care division. Additionally, Symrise diversifies its business portfolio through Pinova’s performance specialties segment. The deal is worth $0.4 billion.
The board of PVC producer Axiall Corp. rejected two offers from US-rival Westlake Chemical Corp. The latest bid totalled $3.1 billion including Axiall’s outstanding debt. Despite the rejections, Westlake continues to pursue Axiall’s shareholders in the hope of striking a deal.
The PE firm, WL Ross Sponsor LLC, announced the acquisition of Nexeo Solutions Holdings LLC, a worldwide leader in chemical and plastics distribution, for $1.7 billion. WL will acquire Nexeo from TPG Capital, another investment firm, which plans on retaining a 35% stake in the company.
Allnex S.A., backed by PE firm Advent International Corp., placed a $0.7 billion bid for Nuplex Industries Ltd., a producer of resins used in paints, coatings and structural materials. The deal allows Advent to further increase its stake in the coating resins business after its acquisition of Allnex for $1.2 billion in 2013.
The Development Bank of Japan (DBJ) will acquire Kinugawa Rubber Industrial, a producer of rubber autoparts, for $0.5 billion. Kinugawa seeks to diversify its client portfolio with the help of the state-owned bank and its broad business contacts. Currently over 50% of Kinugawa’s sales are to Nissan Motor Group. For the DBJ, it will be the first acquisition of a public company.
The S&P 500 Chemicals Index rebounded from a steep decline in January to close Q1 2016 up 1.8%, slightly ahead of the MSCI World Index (+1.1%). However, the Bloomberg chemical indices for Europe (-1.8%) and Asia (-1.9%) underperformed the MSCI World Index.
China National Chemical Corp (ChemChina) announced the acquisition of Swiss-based seeds and pesticides giant Syngenta AG for $43.0 billion. The deal will be the largest overseas acquisition by a Chinese company. It is also the second largest takeover in the history of the chemicals sector, the first being the $62.1 billion merger of Dow Chemical Co. and E.I. du Pont de Nemours and Co. announced in Q4 2015.
Syngenta ranks among the world’s leading agrochemical companies with revenues of $13.4 billion in 2015. It attracted interest from rival Monsanto last year but rejected several offers of up to $46.0 billion. The deal gives Syngenta the opportunity to break into the Asian market with lower costs and helps ChemChina to reduce the dependency on oil and oil-related products through the diversification of its business portfolio.
The deal follows the announced takeover of KraussMaffei Group, a world-leading manufacturer of machinery for the plastics and rubber processing industry, by a consortium of investors including ChemChina. The $1.0 billion deal represents the largest Chinese bid for a German company ever. In addition, ChemChina acquired a 12% minority stake in Swiss-based Mercuria Energy Group Holding SA, a global energy and commodity group. ChemChina’s recent acquisitions are part of a growing trend of Chinese overseas acquisitions aimed at industrial upgrading and global diversification. This strategy has become increasingly attractive in the light of sluggish domestic growth.