BUSINESS
MERGER ACTIVITY KEEPING UP IN ’08
availability of the target company. We’ve seen companies wait for years or try several times before they get what they want.” According to Dow, its union with Rohm and Haas will form the world’s leading specialty chemical and advanced materials company. Now deal watchers are turning Billion-dollar CHEMICAL ACQUISITIONS continue, their attention to BASF and DuPont; both but the number of deals is down companies have used recent earnings reports to reaffirm their aggressive goals for growth. leader at PricewaterhouseCoopers (PWC), In a conference call with investors, DuTHE CHEMICAL INDUSTRY has not seen a tax and advisory services firm. “There was Pont Chief Executive Officer Charles O. a significant slowdown in merger activity already the message that companies were tryHolliday Jr. said his company’s strong cash this year despite weakness in the global ing to use M&A to drive a step change in their position in this time of weak credit markets credit markets. On the first business day business in response to raw material volatilwould allow it to find good deals for its of 2008, AkzoNobel kicked things off by ity and to get access to end user markets.” agriculture and nutrition and its safety and completing its $16.3 billion takeover of ICI. Deal value is not the only story in chemical protection businesses. He also said DuPont The deal was first announced in June 2007, industry M&A activity, however. The numwould seek opportunities in developing a record year for large mergers. The deal is ber of completed buyouts worth more than regions such as China and India, but that it also, by far, the largest one finalized in the would not seek out “some first half of the year. big, massive acquisition.” That one big-ticket STRONG START Young says an initem pushed the total Seven deals valued at $1 billion or more were creasing proportion value of completed deals of takeover targets are to $36 billion by the end completed in first half of 2008 in Asia and the Middle of June, according to VALUE MONTH/YEAR East. Young & Partners’ Young & Partners, an ACQUIRER TARGET ($ BILLIONS) ANNOUNCED analysis divides the globe investment banking firm AkzoNobel ICI $16.3 June 2007 into three segments: the that provides merger, acNational Starch & Chemical 5.5 July 2007 Henkel U.S., Europe, and the rest quisition, divestiture, and PPG Industries SigmaKalon 3.0 July 2007 Agrium UAP Holding 2.6 December 2007 of the world/Asia. In the other services to chemiIndustrial Equity Investments Arysta LifeScience 2.2 October 2007 first half of 2008—and cal and life sciences Incitec Pivot Dyno Nobel 1.9 March 2008 for the first time ever— firms. The figure means Tata Chemicals General Chemical 1.0 January 2008 the ROW/Asia category that the value of mergers Industrial Products led in the share of deals and acquisitions (M&A) SOURCE: PricewaterhouseCoopers done at 41%. Europe may be on sufficient pace came in second, with to break last year’s record $25 million was 34 in the first half of 2008, a 35%, leaving 24% of targets in the U.S. of $55 billion. In fact, the first half of this rate that when annualized falls well short of Chemical deals are increasingly happenyear saw seven completed deals worth more the 81 completed in 2007. The difference may ing across international borders, one sign than $1 billion; 11 such megadeals were be due in part to fewer investments by private of the globalization of the industry. In the completed in all of 2007. equity buyers; they were responsible for 18% first half of 2008, 68% of deals were crossInterestingly, no large deals were anof deals in the first half compared with 28% border, a slight uptick from last year’s 63%. nounced in the second quarter of 2008. But in the first-half of 2007. Private buyers have Young says the chemical industry in nontwo big deals announced in the first quarbeen less active since the second half of 2007, Western markets has grown in scale and ter—Incitec Pivot’s purchase of Dyno Nobel when access to credit began to tighten, says maturity. “M&A activity in a region starts for $1.9 billion and Tata Chemicals $1 billion Peter Young, president of Young & Partners. when the market reaches a certain level of buyout of General Chemical Industrial development; it has to be past the start-up Products—were completed in the period. stage. Now the growth in demand is shiftFrom there, industry consolidation ACCORDING TO PWC’s Bruce Chalmers, ing to Asia and the Middle East,” he says. seemed to gain momentum again in the director of transaction services and coauPWC’s Fato says the shaky economy may summer. In July, two powerhouse mergers thor with Fato of the company’s “Chemiput a damper on mega mergers during the were announced: Dow Chemical’s agreecal Compounds” report, strategic M&A rest of 2008, but he suspects that buyout ment to acquire Rohm and Haas for $18.8 activity happens on its own schedule and activity will likely continue at a brisk pace. billion and Ashland’s deal to pay $3.3 billion is affected more by the conditions of the “There is no relief in sight for volatility,” he for Hercules. companies involved than by the overall says. “Chemical companies will continue Even before the two megamergers were economic outlook. “The well-positioned to reposition themselves to remain comnews, it was clear that the chemical industry strategic players have plans in place and petitive with bolt-on or niche acquisitions. would not turn away from a good deal in spite know who they want to buy,” Chalmers We’re in uncertain times, but there is still a of gloomy economic conditions, according says. “They are waiting for good timing, sense of urgency.” —MELODY VOITH to Saverio Fato, global chemicals industry based on a good financial position and WWW.C E N- ONLI NE .ORG
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