05 November 2012 20:30 [Source: ICIS news]
By Joseph Chang
“It’s been a slow year with the level of confidence and activity down. A confluence of events and conditions has led to a downturn,” said Leland Harrs, managing director of US-based investment bank The PrinceRidge Group.
“Talking with senior management at companies and private-equity firms, we’re finding the brew of the pending
However, next year holds more promise, said Harrs.
“You get a sense that things are on hold. We believe there will be a reversal and that M&A activity will pick up in 2013,” he added.
Private equity firms are looking for assets to buy and sell, transactions multiples are up, financing is available, and chemical companies are also acquisitive, noted the banker.
“The conditions are all there for increased activity. We are just short on the supply of assets for sale. There just aren’t enough assets to satisfy demand,” Harrs said.
While chemical companies continue to restructure, the level of activity and resulting businesses for sale, especially in the US, has not picked up in a meaningful manner, noted the banker.
In the US, DuPont has already agreed to sell its automotive coatings business to US private equity firm Carlyle Group for $4.9bn (€3.8bn), while Cytec Industries is selling its coatings resins unit to private equity firm Advent International for $1.03bn. Both deals are expected to close by the first quarter of 2013.
There have been less of these auction deals with wide distribution to potential buyers. Two other pending high profile deals in the
That includes polyvinyl chloride (PVC) producer
Another example of a direct approach to a deal is the proposed leveraged buyout (LBO) of butadiene (BD) producer TPC Group.
Global investment firm First Reserve and US private equity firm SK Capital agreed with TPC Group on a buyout at $40/share in August 2012, only to be trumped by a bid by UK-based specialty chemicals company Innospec and US private equity firm Blackstone Group at between $44-46/share in October.
Private equity firms should continue to be active as buyers of chemical assets in 2013, buoyed by a favourable financing market, noted McNicholas.
“There is every indication that 2013 will be a favourable year for financing. The Fed is committed to keeping rates low and there is great demand for debt as we’ve seen record issuance in the high-yield market,” McNicholas said.
($1 = €0.78)
Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy
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