After the tsunami comes a new wave

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Few have been hit harder by the global financial and economic crisis than Japan. Its export-based economy heavily exposed to automotive and electronic goods came under severe pressure and challenges persist.

However, this economic tsunami will put a charge into the pace of structural reform – it is already happening in Japan’s chemical industry with massive restructuring involving plant shutdowns, and a flurry of joint ventures and alliances.

Mergers and acquisitions, while likely to continue on a limited scale, are not the answer to the Japanese chemical industry’s structural issues. Rather Japan is ready to begin a new era of strategic alliances to access feedstocks and leverage technologies.

Japanese chemical M&A activity has slowed considerably in recent years, with 10 deals over $25m in size involving a Japanese buyer or seller completed in 2006, four in 2008 and one in the first half of 2009, according to New York-based investment bank Young & Partners.

However, joint ventures and alliances are picking up. In August, Mitsubishi Rayon signed a $1bn JV deal with Saudi Arabia’s SABIC to produce methyl methacrylate (MMA) and polymethyl methacrylate (PMMA) in Saudi Arabia for the automotive and electronics industries.

Mitsubishi Rayon also in September formed an alliance with US-based Cytec industries to develop carbon fiber composites for the next generation of aircraft.

But there could be some interesting M&A deals to come. Mitsubishi Rayon, which completed its $1.6bn acquisition of UK-based MMA producer Lucite International, may itself be the target of an acquirer. Rumors abounded this past summer that the company was in talks to be acquired by Japan’s chemical leader Mitsubishi Chemical for up to $2bn.

With all the exciting changes in this industry, we are delighted to present the October 26 special issue of ICIS Chemical Business with our esteemed partner, The Chemical Daily, of Japan, whose editors provide invaluable insight into this market.

 

Photo credit: Syntagma Media

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