26 February 2013 22:29 [Source: ICIS news]
NEW YORK (ICIS)--Global chemical mergers and acquisitions (M&A) valuations are likely to remain robust in 2013 after a strong 2012, one investment banker said on Tuesday.
The specialty chemical median multiple of total enterprise value (TEV) to EBITDA (earnings before interest tax, depreciation and amortisation) multiple for closed deals in 2012 was 10.4 times, down slightly from a record 10.7 times in 2011, noted Allan Benton, vice chairman and head of the chemical industry practice at US-based investment bank Scott-Macon.
Commodity chemical assets fetched a median EBITDA multiple of 8.6 times in 2012 – up from 6.5 times in 2011.
“While the volume of activity was down in 2012 for both commodity and specialty chemical deals, valuations held up quite well,” said Benton.
“As long as earnings are good and margins are high, I don’t see any abrupt decline in valuations in the near term,” he added.
Profitability for specialty chemical companies increased in 2012, with a median EBITDA margin of 17.5% versus 15.3% in 2011. It was the best performance in five years, said the banker.
Prospects are favourable for the coatings, adhesives and sealants sector – both in terms of profitability and consolidation potential, he pointed out.
“There is a strong pick-up in new home construction in the US, and we expect companies selling products into the home building sector to do well,” said Benton.
“And despite the fact that there are large companies in this sector, there are also many smaller companies. There is certainly room for more consolidation,” he added.
Overall deal value was still below average levels, leaving more room for upside, said the banker.
The median total dollar value on a TEV basis for specialty chemical deals over the past 10 years was $31.1bn (€23.6bn), while there were only $23.7bn in deals completed in 2012, Benton noted. The number of closed specialty chemical transactions in 2012 however was 34, the same as the 10-year median.
The banker sees more divestiture activity among chemical companies in 2013.
US-based specialty chemical company Rockwood Holdings plans to sell or spin off its titanium dioxide business by the end of 2013 and is exploring strategic options for its ceramic materials and performance additives businesses.
US-based DuPont, having sold its automotive coatings unit to private equity firm The Carlyle Group for $4.9bn ($5.1bn in TEV), is seeking a buyer for its cyanide business, according to media reports.
“Companies will look to focus on areas with better margin and growth potential, but even if growth isn’t high, buyers are willing to pay up for assets if they generate a good margin and have high market share,” Benton said.
($1 = €0.76)
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