Buy. Sell. Rinse. Repeat.
The June M&A issue
It has been a BUSY four weeks of mergers and acquisitions the last four weeks. One thing that the chemical industry is quite prolific in is the speed at which businesses are spun off, bought, sold, merged, and held by different groups of shareholders. As new industrial chemists enter the R&D ranks it can be very easy to think, “this seems really unstable. Maybe I should get a new job.” But no matter where you go I would expect things to be uncertain. Chemicals businesses are often built on what I would consider “home runs” or “the greatest hits” and if you are working on the next greatest hit you will likely be quite valuable until you are not (see my piece on layoffs). I’ll do something on the greatest hits theory later.
In the meantime if you are a chemist who has been effected negatively by a M&A event reach out to me. I’d like to talk.
In a bit of news close to my own end market where I work, Westlake is buying Boral’s North American building products business for $2.15 billion. Boral makes a myriad of products that go into roofing, siding, trim, pipes and fittings, and a polyvinyl chloride compounding business. The deal is expected to close by the end of 2021. One interesting thing that factors into current events is that Boral’s siding business is heavily based on gypsum and fly ash, which means that they should be non-combustible. As wildfire season starts in the west of North America retrofitting houses and rebuilding houses with fire resistant siding may be common.
SK Capital has made a sale and buy in the past few weeks by selling Niacet to The Kerry Group for about $1.02 billion. SK Capital bought Niacet back in 2017 for an undisclosed amount from the Brannen family who purchased it from Union Carbide back in 1978. It would be interesting to see the returns on the investment, but I’m guessing it has more than paid for itself at this point. Niacet makes specialty additives for food and pharmaceuticals and will fit in well with The Kerry Group’s portfolio of specialty food additive companies. The enterprise multiple of Niacet is about 15x which is (Market Cap + Debt)/EBITDA. I’m sure SK Capital did well here in the five years of holding Niacet.
Clariant has finally finished their divestment of their pigments business to SK Capital and Heubach, which they have been trying to sell for almost a year, for $951 million. The sale is expected to be about 10-11x EBITDA and will give Clariant a bunch of cash to focus on what they consider to be their core business of care chemicals, catalysis, and natural resources. With all this cash I expect to see Clariant looking to buy out their competition and consolidate the players in their core end markets.
Specialty chemicals maker Element Solutions has announced a binding offer of €420 million to buy Coventya Holding SAS, a maker of surface finishing chemicals. Surface finishing involves imparting a desired property and this could involve finishes on metals, electronics, and optical materials to name a few. It seems to be one of those businesses that no one thinks about, but it is selling for 14x of expected 2021 EBITDA of €30 million. Element Solutions is expecting $13 million in cost saving synergies.
Eastman, which has had steep decline in its stock price, announced a divestment of their tire additives business to One Rock Capital Partners for $800 million. The sale includes the Crystex™ insoluble sulfur and Santoflex™ antidegradants products as well as other additives included in their additives and functional products business. The sale does not include Impera™ or other performance resins of their tire additives business. Tire additives from what I am told by some people in the rubber business are a bit opaque in that rubber formulators play things close to the vest. I’m not sure One Rock Capital is getting a great deal here, but I think Eastman is looking to change their business significantly in the coming years and may look to consolidate many of their product offerings into a few core end markets.
Tony
Sources
https://chemweek.com/document/show/Chemweek/120202
https://www.privateequitywire.co.uk/2017/02/02/248267/sk-capital-acquires-niacet-corporation
https://chemweek.com/document/show/Chemweek/120193
https://www.reuters.com/business/clariant-agrees-sell-pigments-business-950-mln-deal-2021-06-14/
https://www.businesswire.com/news/home/20210611005075/en/Element-Solutions-Inc-Announces-Planned-Acquisition-of-Coventya
https://www.businesswire.com/news/home/20210609005502/en/Eastman-to-Sell-Tire-Additives-Business-Product-Lines