08 January 2008 16:09 [Source: ICIS news]
By Nigel Davis
LONDON (ICIS news)--The big deals in chemicals M&A always catch the attention but the past few weeks have been noteworthy for continued sector activity against the backdrop of the global credit crunch.
Chemical companies still have money to spend at the cycle peak. Most are concerned about the potential for a downturn but the drive to put portfolios and businesses in order before times really do get tough is strong.
It is not so much that the clock is ticking but that smaller deals for the industrial players are still relatively easy to complete.
For the bigger transactions, producers believe they are in a better position now than at this time last year given the lack of competition from private equity amid the fallout from the ?xml:namespace>
So the deals go on as one bank’s broking arm put it this week. Credit Suisse analyst Rhian Tucker noted that the pace of change in European chemicals did not slow in December with further acquisitions, new contract wins and investments.
The same is true globally even though the sector might be expected to be on the down slope of the M&A cycle.
Among the bigger deals this past month have been those between
Arkema has revealed plans to buy Repsol’s polymethylmethacrylate (PMMA) sheet and block business in
The total value of mergers and acquisitions in chemicals in 2007 is expected to surpass the all time high set in 2006 of $42bn says investment bank Young & Partners. And the records will be set despite the credit crisis which dominated the second half.
The global chemical industry completed $38bn (€26bn) in M&A deals in the first three quarters of 2007. Of these, 63 were worth more than $25m and eight were above $1bn. Europe dominated the activity with 48% of target business against 29% for the
The drivers for chemicals M&A have not changed but the deal environment has and Young & Partners notes that in the third quarter of last year private equity’s share of chemicals deals dropped to 17% of deals completed and 14% of their value from 28% and 36% respectively in the first half.
The absence of private equity has altered the chemicals M&A landscape certainly and the credit crunch made larger transactions more difficult.
But sub $1bn deals can still be done. Industrial players should also feel more assured that they might win an auction for strategic businesses in the absence of players with particularly deep pockets.
Without doubt, 2007 was a banner year for chemicals M&A but as always in the sector there is a deep undercurrent of activity that works to alter the industrial landscape. The chemical industry remains in flux.
($1 = €0.68)
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