15 April 2008 17:01 [Source: ICIS news]
By John Baker
LONDON (ICIS news)--The main arena for chemical merger and acquisition (M&A) activity over recent decades has been the west, with the vast majority of deals being done in North America and ?xml:namespace>
And largely, it must be said, within and not between these two regions.
Indeed, it is virtually received wisdom that Europeans find it particularly difficult to buy successfully in the US, given recent reverses in the food, retail and automotive sectors.
BP’s purchases of Amoco and Sohio are an exception to the rule in the oil and chemicals sector, but European chemical players have struggled over the years with ill-judged or ill-timed moves. Take ICI’s acquisition of Glidden as a case in point.
But the last few years have seen increasing activity and interest in M&A by Asian companies, both intra-regionally and into the west.
Indeed, BlueStar has made some successful moves, for the likes of Qenos in
The role model, in chemicals at least, is inevitably Saudi Basic Industries Corp (SABIC), with its forays into the west to pick up the petrochemical and polymer assets of DSM, Huntsman and GE. Its name is even now being touted as a bidder for BASF’s commodity styrenics business and Lucite, the methyl methacrylate (MMA) specialist.
The one country that has proved less active, surprisingly so given its relative size and strength in petrochemicals, is
A recent report* on global chemical M&A from Mitsubishi Chemical’s research department explains why, but at the same time concludes that inevitably M&A will play a role in consolidating the Asian chemicals market.
Report author Masaru Kani says that cultural differences still play a role in how M&A is perceived in
In recent years, Japanese firms have engaged in an increasing number of M&A deals in the domestic arena. In 2006, there were 2,775 deals reported across all industries, worth some yen (Y) 3,700bn ($37bn), he says.
But these were largely made between small and middle-sized companies or among the operating subsidiaries belonging to a business group.
This could be, he explains, because of the belief still prevailing in
He contrasts this with the so-called Anglo-Saxon model that holds in the
But, he adds that the upwards trend in Japanese M&A “clearly indicates that Japanese firms have also begun to regard M&A as a legitimate tool for restructuring themselves”.
The report, however, does not see this as likely extended outside
Thus in Asian petrochemicals, at least, the Chinese players, notably Sinopec and PetroChina, will emerge as dominant producers of basic feedstocks such as ethylene, propylene and butadiene by 2013, with Reliance and Taiwan’s Formosa Plastics Corp (FPC) some way back in third and fourth place (with Japan’s replacing Reliance in the top four for butadiene).
The rankings, given for a series of petrochemicals, both globally and regionally for
They also reveal just how big an effect future M&A could have on market shares in
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