Markets & Companies

2017 Through the Rear-view Mirror

Part 2: Chemical Producers Lead M&A Activity

08.01.2018 -

The chemical production sector saw more activity than pharmaceuticals in 2017. Beyond the mega-mergers, one of the most significant deals of 2017 was BASF’s announcement in early December that it had signed a letter of intent with LetterOne (L1) to merge its oil and gas subsidiary Wintershall with DEA, the gas producer owned by a Luxembourg-based consortium of Russian investors led by Russian billionaire Mikhail Fridman. 

BASF said it would hold the majority of the joint company, which would be one of the largest independent players in European oil and gas exploration and production. Analysts estimated its potential worth at up to €14 billion.

The world’s largest PET producer, Thailand-based Indorama Ventures (IVL), traveled the acquisition trail all year, without disclosing the price it paid for any of the assets it gobbled up. One of them was DuPont Teijin Films (DTF), a major producer of biaxially-oriented polyethylene terephthalate (BOPET) and polyethylene naphthalate (PEN) films and a joint venture between Japan’s Teijin and DuPont.

Indorama also bought out Austria’s Glanzstoff Group, a manufacturer of tire cord, and the Mexican operations of US durable technical textiles maker DuraFiber Technology. The Thai titan also agreed to purchase the PTA plant of Artlant PTA in Portugal.  The facility for the polyester feedstock, located in the Sines Industrial Complex, is one of Europe’s largest with a capacity of 700,000 t/y. Artlant, a remnant of the PET powerhouse of an earlier day, La Seda de Barcelona, before the Spanish group overextended itself and collapsed, was declared insolvent in July.

Split-ups, top-ups and buy-ups

Many of the transactions announced or concluded in 2017 involved joint venture split-ups, with the businesses taken over by one of the partners. Ineos was active as usual, especially in buying out partners. In France, the Swiss-based group took full ownership of Oxochimie, its 50:50 jv with French chemicals group Arkema.

Oxochimie produces feedstocks for Arkema’s acrylic ester production in Europe and will continue to supply it. Ineos said the deal would broaden its presence in a core business, and Arkema said it planned to reinvest the proceeds from the divestments of assets worth €700 million in annual sales in its own core businesses.

Arkema previously had sold its activated carbon and filter aid operations, with annual turnover of some €93 million, to US group Calgon Carbon for $163 million. During 2017 Japanese chemicals, resins and fibers group Kuraray acquired Calgon Carbon for $1.1 billion.

In a strategically important move for both sides, BASF agreed to take Solvay’s global integrated polyamide (PA) business for €1.6 billion, boosting the German chemical giant’s presence in Asia and South America and giving it access to key raw material adiponitrile. For the Belgian player, the divestment was part of CEO Jean-Pierre Clamadieu’s plans to transform the group into a multi-specialty chemicals producer.

Canada’s Nova Chemicals agreed to pay $2.1 billion to acquire Williams’ 88.46% stake in the US company’s olefins plant at Geismar, Louisiana. The purchase included undeveloped land adjacent to the facility, as well as Williams’ interest in the ethylene trading hub in Mont Belvieu, Texas.

Also in 2017, Dow Chemical announced plans to raise its stake in Sadara Chemical, a joint venture with Saudi Aramco, to 50%. The two companies have signed a non-binding Memorandum of Understanding (MoU) that sets in motion a process by which Dow can acquire an additional 15% share, giving both equal ownership. The US group currently holds 35%, with the Saudi energy giant 65%.

Other important transactions of 2017

A few steps down the trail value scale, Germany’s Lanxess sealed its acquisition of US additives producer Chemtura for $2.5 billion after signing a “definitive” agreement in September 2016. For Cologne-based Lanxess, the buyout was a mega deal – the largest in the history of the company spun off from Bayer in 2004 and floated on the Frankfurt stock exchange a year later.

Early in 2017, US titanium dioxide (TiO2) producer Tronox announced plans to acquire the TiO2 business of Saudi Arabian competitor Cristal for $1.673 billion, creating the world’s largest and most highly integrated TiO2 pigment producer. In December, the US Federal Trade Commission (FTC) sought to block the deal on competition grounds, but Tronox vowed to fight back.

Tronox planned to finance the buy through the sale of its Alkali Chemicals business, world’s largest producer of natural soda ash, flogged off to midstream services provider Genesis Energy for $1.33 billion in cash.

Ineos paid UK oil and petrochemicals giant BP £250 million to buy the Forties Pipeline System (FPS) that transports 575,000 bbl/d of oil from the UK’s first major offshore oil field, linking 85 North Sea oil and gas assets and also feeding Ineos’ refinery at Grangemouth, Scotland. Ineos also completed the purchase of Dong Energy’s oil and gas production last year for more than $1 billion. This transaction included ten gas and oilfields operated by the Danish company in Norway and the UK in addition to Denmark.

US nylon producer Invista entered into a definitive agreement with Shandong Ruyi Investment Holding, one of China’s largest textile manufacturers, to sell its portfolio of apparel-focused fibers and brands, while retaining its nylon, polyester, polyols and licensing businesses and related brands.

Pennsylvania-based US styrenics producer Trinseo signed a definitive agreement to acquire Italy’s family-owned API Applicazioni Plastiche Industriali in an unquantified all-cash deal. It was the company’s first acquisition since being spun off from Dow Chemical as Styron in 2010.

German specialty chemicals producer Altana acquired Solvay’s formulated resins business for an undisclosed sum. Solvay had gained the assets with around $20 million in sales as part of its 2015 purchase of Cytec Industries.

Also during 2017, Solvay agreed to sell its 50% stake in Brazilian PVC compounder Dacarto Benvic to its local joint venture partners and divested its chloralkali plant at Torrelavega, Spain, to Portuguese producer CUF for an undisclosed sum. CUF said it intended to invest €55 million to acquire the plant and install a membrane-cell chlorine facility at the site.

In an all-US deal, Versum, the electronic materials spin-off of US gases producer Air Products, said it would acquire Dynaloy, a supplier of formulated cleaning solutions for the semiconductor industry.

US coatings group Axalta acquired Plascoat Systems, a UK-based leading supplier of thermoplastic powder coatings, from parent company International Process Technologies (IPT) for an undisclosed sum. The purchase is the latest in a long line of deals Axalta has clinched in the past two years, including a binding offer to buy the European and Chinese operations of wire enamel manufacturer IVA.

Axalta last year also picked up Valspar’s North American wood coatings business for $420 million after Valspar was acquired by US-based coatings market leader Sherwin-Williams. Also in the coatings sector, AkzoNobel acquired the UK’s Flexcrete Technologies and announced an agreement to buy French manufacturer Disa Technology (Disatech).

DSM of the Netherlands agreed to make an initial investment of $25 million in US industrial bioscience company Amyris, giving it an equity stake of about 12%. DSM also bought Amyris Brasil from Amyris for $58 million.

French gases producer Air Liquide boosted its healthcare business in Japan with the acquisition of Sogo Sangyo Kabushiki Kaisha (SSKK).  The company also acquired a majority stake in Oxymaster, strengthening its presence in South America.

Belgian materials technology and recycling group Umicore agreed to acquire the metathesis catalyst business of Pasadena, California-based Materia, valuing the assets at $27 million.

US technology company W.R. Grace said it planned to buy Albemarle’s polyolefin catalysts business for $416 million, strengthening Grace’s single-site PE catalysts portfolio while allowing Albemarle to streamline its portfolio.

Israel Chemicals (ICL) agreed to sell its fire safety and oil additives businesses to South Korean private equity firm SK Capital for about $1 billion. The divestment is part of ICL’s strategy to shed low synergy businesses and focus on its core mineral operations.

SK Global Chemical, part of SK Innovation, took over Dow Chemical’s polyvinylidene chloride (PVDC) business last year, including all production facilities in the US state of Michigan, as well as technologies and patents and the Saran brand name. Analysts said the acquisition could be worth $100 million. Earlier, SK purchased Dow’s ethylene acrylic acid (EAA) business for $370 million.

Just outside the core chemicals field, US engineering contractors CB&I and McDermott International agreed to merge in an estimated $6 billion all-stock transaction, creating a vertically integrated onshore-offshore company. McDermott shareholders will own 53% of the combined company and CB&I shareholders the rest.

To read more about the important events of 2017, click on the links below.