InterviewSpecialty chemical M&A valuations to stabilise in 2010

11 February 2010 22:35  [Source: ICIS news]

NEW YORK (ICIS news)--Transaction valuations for global specialty chemical acquisitions are likely to stabilise in 2010, after falling significantly in 2009, a US investment banker said on Thursday.

“Financial buyers are able to get financing and are coming back into the market. Plus, strategic buyers are actively looking for quality businesses that can provide good synergies while valuations are relatively attractive,” said Allan Benton, vice chairman and head of chemical practice at US-based investment bank Scott-Macon, in an interview with ICIS.

For specialty chemical deals completed in 2009, the median transaction multiple was 7.3 times trailing 12-month earnings before interest, tax, depreciation and amortisation (EBITDA) – a decline from a median multiple of 9.6 times in 2008, according to Benton.

“We’re seeing an improvement in multiples offered for good quality assets, especially for strategic deals,” said Benton.

US plastics compounder A Schulman’s 2 December offer to acquire ICO, a US-based producer of custom polymer powders and plastic film concentrates - valued at $199m (€145m), including debt - represents a multiple of about 15 times trailing 12-month EBITDA, he estimated.

And US industrial gases producer Air Products’ unsolicited bid to acquire US packaged gases firm Airgas for about $7bn, including debt, represents a multiple of about 10 times EBITDA, noted Benton.

Private equity buyers have also been more active in the second half of 2009 and in early 2010 than in the first half of 2009, he said.

On 28 January, Canadian private equity firm TorQuest Partners completed its acquisition of wood-rosin and natural-wood-terpenes business Pinova from US specialty chemical firm Ashland for $75m.

Ashland also sold its Drew Marine water treatment business to another private equity firm – US-based JF Lehman – in August for about $120m.

Meanwhile, private equity firm American Securities completed its acquisition of US chemical, valve and auto parts firm GenTek for $562m ($411m in cash plus the assumption of debt) last October. The deal was done at a relatively low multiple of 4.6 times EBITDA, noted Benton.

Acquirers of mid-market assets were able to secure financing at improved multiples of EBITDA in the second half of 2009 compared to the first half, while large deals could also obtain greater leverage, said Benton.

($1 = €0.73)

To discuss issues facing the chemical industry go to ICIS connect
Bookmark Paul Hodges’ Chemicals and the Economy blog

By: Joseph Chang
+1 713 525 2653

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly