20 July 2007 17:19 [Source: ICIS news]
By Nigel Davis
In a week when Basell’s owner Len Blavatnik agreed to put $19bn on the table for Lyondell, BASF said it was mulling over an offer for its difficult commodity styrenics businesses and NOVA Chemical was put in the M&A frame by some analysts, chemicals merger and acquisition feeding frenzy was in top gear.
Industry players want to consolidate fast – and while they can. Deal values are high and have opened up new opportunities.
Basell is estimated to be paying 11 times normalised EBITDA (earnings before interest, tax, deprecation and amortisation) for the integration-related delights of Lyondell.
BASF clearly sees the chance to focus on the better prospects of polystyrene foams and distance itself from the difficult styrene monomer, polystyrene and ABS (acrylonitrile butadiene styrene) businesses.
Money has been cheap and plentiful as private equity funds and others with cash to burn stay on the look out for more places to invest.
But the window of opportunity is closing fast.
Concerns are mounting over
The momentum behind business and the financial world is significant but oil prices climb ever higher and political unrest fills the news media. One world is not divorced from the other.
Political storms can be ridden; spectacular growth in
The chemical industry will not be immune to fiscal trends. Riding on a cash flow plateau and in a world where product prices are high and supply/demand balances strongly positive it is easy to feel satisfied.
But circumstances can change quickly and a world of easy choices can soon become much more restrictive.
Sector players are not there yet. There is some concern among the rating agencies over the level of increased chemical company spending but demand growth projections are positive. There are few warnings as yet.
Further consolidation in chemicals is achievable and the owners of some assets might still be able to sell them at a healthy premium. But the good times may not last that much longer. Companies need to capitalise while they can on current market conditions.
($1 = €0.72)
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