Valspar, Lubrizol are M&A targets - Citigroup

22 January 2007 17:33  [Source: ICIS news]

TORONTO (ICIS news)--Consolidation in North America's chemicals sector is set to accelerate this year on the back of strong industry balance sheets and private equity’s renewed interest in the sector, Citigroup said on Monday.

 

The analysts pointed to coatings firm Valspar and specialty chemicals and lubricants additives maker Lubrizol as acquisition targets this year.

 

Lubrizol’s business is generating a lot of cash and as such has become potentially attractive to private equity firms, Citigroup said.

 

But with $560m (€430m) in cash on hand Lubrizol could, in the near-term be a buyer itself, making some “bolt-on” acquisitions, Citigroup said.

 

Valspar is a well-managed company with an excellent product portfolio. However, the company lacks vertical integration. Potential bidders could include Dow Chemical, ICI and Akzo Nobel, the analysts said.

 

Commenting on commodities chemicals, Citigroup said it believes that the cycle has peaked and profit will be lower this year than in 2006. It pointed to its downgrade of Canada’s NOVA Chemicals earlier on Monday.

 

Overall, the rise of ethanol and other biofuels will be a factor this year, boosting companies such as DuPont and Monsanto.

 

Industrial gases should also have a solid year following a big round of consolidation in 2006.

 

Citigroup’s top pick is water treatment firm Nalco, with a buy rating and a $25 price target, it said. The stock was priced at $22.13/share, down 0.05%, in early Monday afternoon trading in New York.

 

($1 = €0.77)

By: Stefan Baumgarten
+1 713 525 2653

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