More chemical mega deals expected - Nexant

06 July 2007 18:51  [Source: ICIS news]

By Ivan Lerner

NEW YORK (ICIS news)--The chemical industry should expect more deals the size of the proposed Huntsman acquisition, a Houston-based petrochemical industry analyst said on Friday.

“There is probably no limit to the amount of money a potential acquirer might pay for a public or private company,” said Robert Bauman. “No one is probably safe.”

Earlier this year, GE announced the sale of its plastic unit to SABIC for $11.6bn (€8.6bn), and rumours of a possible Dow buyout floated prices in the $50bn-60bn range.

Companies now feel that they need to be a combination of a commodities and specialties company to be competitive on a global basis, said Bauman.

“The most profitable long-term survivors will be those large, global commodity chemical companies that also have more specialties and differentiated products, and are global,” he said.

More and more commodities are being produced in lost-cost regions where US, European and Japanese companies cannot compete on cost, noted Bauman. “If a chemical company buries its head in the sand, it will not survive long-term,” he said.

At the end of last month, Basell, privately-owned by Access Industries, offered $9.6bn for Huntsman: $25.25/share plus the assumption of debt. This deal includes the provision where Huntsman would pay a $200m fee if the company called off the deal.

Earlier this week, Hexion Specialty Chemicals, owned by Apollo Management, offered $27.25/share for Huntsman, as well as the assumption of debt, for a total of $10.4bn. Hexion's bid includes the offer of $100m towards the $200m kill fee.

Huntsman has called Hexion’s offer superior to Basell’s.

($1 = €0.74)

Look for the full story on the return of the mega deal in the 9 July issue of ICIS Chemical Business Americas.

By: Ivan Lerner
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