Along the Acquisition Trail
The Specialty Chemicals Sector is Abuzz with Activity
For the global specialty chemicals sector, the past two years have been among the most exciting of the young millennium. Many mergers and acquisitions were in the spotlight in 2017 and more have moved into it in 2018. Two of the biggest deals have been completed, the $130 billion mega-merger between US chemical giants Dow Chemical and DuPont and the takeover of Swiss agrochemicals major Syngenta by ChemChina for $43 billion. A third is still being scrutinized by regulatory authorities, while two other transactions with potential to shake up the industry fizzled last year.
The Rocky Road to Mega-mergers
In mid-March 2018, Bayer was still struggling to win approvals for its $63.5 billion acquisition of Monsanto. After pledging to sell seeds assets with sales of €1.3 billion to BASF for €5.9 billion to satisfy the European Commission, the Leverkusen giant has allowed its former rival in Ludwigshafen an exclusive look at the books on another asset package, believed to be worth around €1.5 billion. While environmentalists and farmers continued to protest, news agencies said EU approval was near.
Spectacular deals that will not take place include the proposed takeover of AkzoNobel by US rival PPG and the merger of Clariant and Huntsman. After a protracted battle, the Dutch paints group successfully shook off PPG, which in the last round had offered $26.9 billion. The planned $20 billion fusion of the Swiss and US specialty chemicals producers ran aground on the opposition of an activist investor.
Beyond the “big bucks” transactions, the past 15 months have seen mergers and acquisitions of all sizes in specialty chemicals, agrochemicals and pharmaceuticals.
Done deals across the entire products spectrum
Germany’s Lanxess sealed its purchase of US additives producer Chemtura for $2.5 billion. The buyout was the largest in the history of the company spun off from Bayer in 2004 and floated a year later. Lanxess also completed its acquisition of Solvay’s €65 million phosphorus chemicals business, including the US production site at Charleston, South Carolina.
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.
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.
Axalta also picked up Valspar’s North American wood coatings business for $420 million, after Valspar was bought by US market leader Sherwin-Williams. In other coatings deals, AkzoNobel acquired the UK’s Flexcrete Technologies and announced plans 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.
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.
UK specialty chemicals company Croda made a cash offer for compatriot Plant Impact, a crop-enhancement specialist, for about £10 million. The acquisition was due to complete on Mar. 28. Croda also acquired Nautilus Biosciences Canada, a marine biotechnology company. Financial terms were not disclosed.
Belgian chemicals and plastics producer Domo Chemicals took an undisclosed stake in Group Michiels Advanced Materials (Group M.A.M.) as part of a partnership in specialty film coating.
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.
AkzoNobel began negotiations with three or four potential buyers of its Specialty Chemicals division. The company has set an April 2018 deadline to sell or spin off the business employing around 9,000 people and accounting for about a third of its total sales and earnings. Buyers are said to include Dutch pension fund PGGM, private equity groups Carlyle, Bain and Advent.
PPG recently announced plans to buy Dutch wholesaler ProCoatings for an undisclosed sum after failing to buy AkzoNobel. ProCoatings sells a large portfolio of well-known professional paint brands. The deal was expected to close in the first quarter.
Many Seeds Sown in the Shadow of the Mega-mergers
In late 2017, Syngenta completed the acquisition of Nidera Seeds, the crop seeds business of Chinese grains trader COFCO International for an undisclosed sum. Nidera is an important player in South America.
Nutrien, formed last year through the merger of Canadian fertilizer giants Agrium and Potash Corp of Saskatchewan (PCS), agreed to acquire Agrichem, one of Brazil’s largest fertilizer companies.
M&A Activity with a Distinct Biotech Focus
In pharmaceuticals, super-dimensioned M&A activity has been somewhat more modest. Many of the transactions have been between players in the biochemicals segment or conventional drugmakers who wanted to enter this sector.
In last year’s biggest coup, US healthcare giant Johnson & Johnson scored with Swiss biotechnology firm Actelion, taking the prize for $30 billion after a fierce battle punctuated by a cameo appearance by French drugmaker Sanofi. As part of the agreement, J&J took an initial minority stake of 16% in the research arm spun off to Actelion’s management.
US contract manufacturer Catalent agreed to buy contract development and manufacturing organization Cook Pharmica for $950 million, boosting its position in the fast-growing biologics area.
Swiss fine chemicals and biologics producer Lonza acquired Micro-Macinazione, a contract manufacturer providing micronization of active ingredients for the pharmaceutical and fine chemical industries. Lonza also completed its acquisition of Capsugel, paying US private equity investor KKR $5.5 billion for all assets of the US company regarded as one of the leading producers of capsules for delivery of drugs and food supplements.
US biopharmaceutical company Celgene said it would take a stake in China’s BeiGene and help develop and commercialize that company’s investigational treatment for tumor cancers. Later, BeiGene planned to acquire Celgene's operations in China and also license and assume commercial responsibility for the US company’s approved therapies in China.
Fresenius Kabi agreed to acquire the biosimilars arm of Germany’s Merck KGaA, which is divesting the business to focus on its pipeline of innovative medicines.
Sanofi announced it would buy Protein Sciences, a privately held vaccines biotechnology company based in Meriden, Connecticut, USA.
US Merck & Co unveiled plans to buy Germany-based Rigontec, a pioneer in accessing the retinoic acid-inducible gene I (RIG-I) pathway as a novel and distinct approach in cancer immunotherapy. A Merck subsidiary was to make an upfront cash payment of €115 million to Rigontec’s shareholders, with additional contingent payments of up to €349 million.
Gilead Sciences offered almost $12 billion to acquire compatriot Kite Pharma and gain access to Car-T, Kite’s cutting-edge chimeric antigen therapy treatment for cancer. The experimental treatment re-engineers white blood cells to attack cancer.
The UK’s largest player, GlaxoSmithKline (GSK), took an additional 26% stake in its Saudi unit, lifting its overall share in Glaxo Saudi Arabia Limited (GSAL) to 75%.
US pharmaceutical giant Pfizer sold its 49% stake in Hisun-Pfizer Pharmaceuticals, its Chinese joint venture with Zhejiang Hisun Pharma. In return, Sapphire I Holdings, indirectly controlled by private equity firm Hillhouse Capital, will acquire Pfizer’s shareholding.
Roche announced plans to buy San Diego, California-based US group Ignyta for around $1.7 billion in cash to expand the Swiss group’s portfolio of cancer medicines. Ignyta is focused on precision oncology.
One of the Most Proactive Sectors in M&A
The past year has been marked by a flood of M&A activity in distribution. German giant Brenntag announced plans to acquire all shares of specialty chemicals distributor Wellstar Enterprises (Hong Kong) and its three Chinese subsidiaries. Brenntag planned to take the majority stake of 51% immediately and the remaining 49% by 2021, operating the business in the interim as a joint venture.
Brenntag also acquired Medellin, Colombia-based Conquimica. The Latin American company mostly provides industrial and specialty chemicals to the coatings, food and cleaning industries and operates four warehouses in Colombia.
US distributor Univar acquired Paulinia, Sao Paolo-based distributor Tagma Brasil for an undisclosed sum, expanding its presence in the agricultural market. Tagma is a leading provider of custom formulation and packaging services for crop protection chemicals, including herbicides, insecticides, fungicides and surfactants.
AMVAC Netherlands, wholly owned by US specialty and agricultural products company American Vanguard, said it intended to acquire Grupo Agricenter, a Costa Rica-based distributor of crop protection products.
Dutch specialty chemicals distributor IMCD bought Bossco Industries, a supplier of products and technical solutions to all major industrial markets in the US Southwest. It also acquired Canadian and US specialty chemicals and ingredients distributor L.V. Lomas and Italian specialty chemicals distributor Neuvendis.
In Italy, performance additives producer Italmatch Chemicals boosted its presence in Latin America with the purchase of Sudamfos do Brasil, a leading Brazilian distributor specializing in phosphonates, phosphates and other specialty chemicals.
Luxembourg-based Azelis acquired Georges Walther, a family-owned specialty chemicals distributor in Pfäffikon, Switzerland, for an undisclosed sum. Most of the acquired firm’s revenue is derived from cosmetic ingredients, essential oils and fragrances. It was Azelis’ fourth buy in 2017, after US distributor Ross Organic, Denmark’s LCH and Chemcolour, based in Australia and New Zealand.
In March of this year, Azelis agreed to take full ownership of Distralim, a Moroccan distributor of food ingredients. Based in Casablanca, Distralim supplies ingredients for confectionery, biscuits and ice cream as well as several non-food segments.
UK-based 2M Holdings, which comprises several companies active in chemical distribution and related services, acquired German specialty chemicals distributor Franken-Kosmetik-Chemiehandel for an undisclosed sum in February 2018. Based in Nuremberg, the family-owned company primarily serves the personal care, home care and food ingredients markets in Germany, Benelux, Croatia, Macedonia and Slovenia.