INTERVIEW: Trinseo to focus M&A on low carbon intensity, high margin businesses – CEO

Joseph Chang

06-Jun-2022

COLORADO SPRINGS (ICIS)–Trinseo will focus its mergers and acquisitions (M&A) strategy on low carbon intensity and high margin businesses as it works on divesting its styrenics business and digesting two major recent acquisitions, its CEO said on Monday.

“We want to continue positioning Trinseo as low carbon intensity and higher profit. We could still be interested in assets with high carbon intensity but with a clear pathway to reduce that,” said Frank Bozich, CEO of Trinseo, in an interview with ICIS.

Bozich spoke to ICIS on the sidelines of the American Chemistry Council (ACC) Annual Meeting in Colorado Springs, Colorado, US.

STYRENICS DEAL BY MID-YEAR
The company is in the process of divesting its styrenics business, with potential buyers in three categories – strategic players looking to consolidate, corporates seeking regional exposure to Europe and North America and private equity firms.

“We anticipate by mid-year we will announce the conclusion of the process,” said Bozich.

There are no planned additional divestitures beyond styrenics, he noted.

BASE PLASTICS/ENGINEERED MATERIALS SYNERGIES
Trinseo’s base plastics business, which includes acrylonitrile-butadiene-styrene (ABS), styrene acrylonitrile (SAN) and polycarbonate (PC), has synergies with some of its recent acquisitions in polymethyl methacrylate (PMMA), the CEO pointed out.

For example, co-lamination of PMMA and ABS can replace fibreglass-reinforced backing used in hot tubs, swim spas and automotive which results in lower volatile organic compounds (VOC) emissions.

In May 2021, Trinseo completed its $1.36bn acquisition of Arkema’s PMMA business, followed by the acquisition of PMMA sheet producer Aristech Surfaces for $445m in September 2021.

These PMMA businesses are now part of Trinseo’s Engineered Materials business, which has one of the best profiles in the chemicals industry in terms of carbon intensity and profitability, the CEO said last week at an event in New York.

“Reducing energy [and thus carbon] intensity has always been part of the opex (operating expenditures) plan but in this environment with a focus on ESG and energy volatility, it is imperative and more urgent,” said Bozich.

Trinseo’s Engineered Materials segment comprises specialty PMMA and thermoplastic compounds and blends for higher margin applications in consumer electronics, medical, footwear, automotive, and building and construction. Compounds and blends include PC and ABS.

This segment posted sales of $755m for all of 2021 and $295m in Q1, reflecting the full impact of the Arkema PMMA and Aristech Surfaces acquisitions.

END MARKET M&A TARGET AREAS
Trinseo will target acquisitions in four key markets – mobility, building and construction, consumer products and medical devices.

“The goal is to broaden the offering of solutions into those end markets so we will evaluate any chemistry for those markets,” said Bozich.

In building and construction applications, Trinseo’s capstock made from PMMA extruded onto polyvinyl chloride (PVC) can replace painted wood and metal used in siding, decking, railing, window frames and doors with 4-6x less VOC emissions versus paint, he pointed out.

PLASTICS RECYCLING
Another area for acquisitions is in plastics waste collection and processing, which would feed into its key end markets.

In January, Trinseo completed its acquisition of Netherlands-based Heathland, a collector and recycler of post-consumer and post-industrial plastic waste in Europe.

Heathland focuses on PMMA, PC, ABS, polystyrene (PS) and other thermoplastic waste. It collects, pre-treats and processes plastic waste using both mechanical and chemical recycling processes.

“We will have a way to collect and process waste that goes into our solutions. If we can buy that capability, we will do that, or build that,” said Bozich.

“We believe there are two components for success in this business. One is having the technological knowhow for mechanical and chemical recycling, and the other is to secure the network for feedstock,” he added.

Trinseo is also developing its own intellectual property (IP) for plastics recycling, with the CEO pointing out that of the significantly higher number of patents it was granted in 2021, about one-third were related to circularity.

The plastics recycling element for M&A and investment is a key part of Trinseo’s sustainability roadmap which includes building circular offerings for customers and building a feedstocks business, along with decarbonising its own operations.

BIG OPPORTUNITY IN SOURCING GREEN AMMONIA
As it looks at its own Scope 3 emissions, which includes the carbon emissions from the raw materials it buys, the CEO sees a big opportunity in green ammonia – not as a hydrogen energy source, but as a feedstock.

“One of the most exiting parts is sourcing green ammonia and what this means for the carbon footprint of our products. We see lots of opportunities on the horizon,” said Bozich.

Trinseo uses ammonia as a feedstock for methyl methacrylate (MMA) production. It sources acetone and ammonia feedstocks for MMA production primarily from two suppliers in Italy, according to its 10-K annual report filing with the US Securities and Exchange Commission (SEC).

To reduce their own Scope 3 emissions – from the products they buy – customers in automotive and consumer products in particular have been much more proactive in looking for sustainable solutions, the CEO noted.

While Trinseo will employ much more M&A in its transformation journey into a specialty chemicals company, its current focus is to “digest the significant amount of activity last year and complete the styrenics divestiture”, said Bozich.

Specialty businesses comprise 35-40% of Trinseo’s sales today and would be about 60% with the potential divestiture of styrenics, he added.

The ACC Annual Meeting runs through Wednesday.

Interview article by Joseph Chang

 

Thumbnail image shows Trinseo CEO Frank Bozich 

READ MORE

Global News + ICIS Chemical Business (ICB)

See the full picture, with unlimited access to ICIS chemicals news across all markets and regions, plus ICB, the industry-leading magazine for the chemicals industry.

Contact us

Now, more than ever, dynamic insights are key to navigating complex, volatile commodity markets. Access to expert insights on the latest industry developments and tracking market changes are vital in making sustainable business decisions.

Want to learn about how we can work together to bring you actionable insight and support your business decisions?

Need Help?

Need Help?