Chemicals and Specialty Materials Update

Introduction

Harris Williams is pleased to present its chemicals and specialty materials industry update for Q2 2018. This report provides commentary and analysis on current market trends and merger and acquisition dynamics within the global chemicals and specialty materials industry.

In terms of deal activity, the second quarter finished strong with a spate of sizable transactions announced in the second half of June.  And in keeping with the trend of expanding private equity presence in the sector, we continue to see sponsors (both longstanding investors in the space as well as newcomers) get more aggressive for chemicals opportunities that suit their strengths, cater to prior diligence efforts, and / or line up with an operating partner’s expertise.

Looking ahead, despite potential headwinds from burgeoning tariff activity, we see little reason to expect a near-term slowdown in chemicals and specialty materials M&A.  

We hope you find this edition helpful and encourage you to contact us if you would like to discuss our perspective or our relevant industry experience.

Q2 2018 By The Numbers1,2

untitled_237.png

Our Practice

Harris Williams is a leading advisor to the chemicals and specialty materials industry. Our significant experience covers a broad range of business models, market segments, and applications.

untitled_238.png

What We’re Reading

Key Observations And Themes

untitled_239.png

Bain Capital To Buy Italian Chemicals Firm Italmatch3

Reuters  6/28/2018

Private equity firm Bain Capital agreed to buy Italian chemicals maker Italmatch from French investor Ardian, the companies announced, defeating rival bids from KKR and Cinven. The firm did not disclose a deal value, but sources familiar with the matter told Reuters that Bain will pay around 700 million euros ($810 million) to take control of the Genoa-based company.

Italmatch has been controlled by Ardian since 2014 and Bain said in a statement that under Ardian ownership, Italmatch has more than doubled its sales over the past four years.

Read the full article here.

Apax Partners Receive Binding Offer For Azelis4

PE Hub  6/19/2018

Azelis, a leading global specialty chemicals and food ingredients distributor, today announced that Funds advised by Apax Partners, the global private equity advisory firm, have received a binding offer and have entered into exclusive discussions to sell Azelis to the EQT VIII fund and PSP Investments. The transaction, which is subject to regulatory approvals, and other conditions including consultation with employee representatives, is expected to close in the fourth quarter of 2018.

Established in 2001, Azelis is a leading global specialty chemicals and food ingredients distributor providing a diverse range of products and innovative services to more than 43,000 customers in over 40 countries worldwide.

Read the full article here.

Buyers Step Up To Chemical M&A5

ICIS    6/7/2018

With demand for quality chemical assets high and not enough available on the selling block to meet demand, buyers are taking a more aggressive approach to get deals done.

For publicly-traded chemical companies, the continued resurgence of organic growth in the past few quarters is driving more confidence among senior management to make acquisitions.

Read the full article here.

Germany's Bayer Closes $63 Billion Monsanto Takeover, Plans To Drop U.S. Company's Name6

CNBC  6/7/2018

German conglomerate Bayer has closed its $63 billion merger with Monsanto after getting the required nod from U.S. and EU regulators.

The closing sets the stage for the 117-year-old agribusiness brand name "Monsanto" to be dropped by Bayer. Monsanto's efforts to promote genetically modified crops have been the subject of much controversy from anti-GMO activists, and the U.S. company has spent millions of dollars over the years on brand and corporate ad campaigns to improve its overall image.

Read the full article here.

Public Comparables7

untitled_240.png

Public Markets Overview7

Chemicals And Specialty Materials Trading Statistics

screen_shot_2018-07-11_at_4.47.05_pm.png

Chemicals And Specialty Materials Index (12-Month Performance)

screen_shot_2018-07-11_at_4.48.48_pm.png

HW&Co. Commentary 

  • Chemicals and specialty materials public companies are currently trading at an overall median of 10.3x NTM EBITDA
  • Strong quarter-over-quarter performance for many chemical manufacturers and distributors, resulting in part from favorable weather conditions and successful price increases
  • Agriculture chemical providers experienced relatively strong Q2 performance, driven by steadily improving global demand and favorable weather conditions
  • General profitability continues to improve and is anticipated to carry momentum into the second half of 2018
  • U.S. and Chinese trade tensions threaten pockets of industry performance with higher costs and uncertainty

M&A Transactions1,7

untitled_243.png

untitled_244.png

Representative HW&Co. Chemicals & Specialty Materials Transactions

screen_shot_2018-07-11_at_4.50.52_pm.png

1.Mergermarket

2.American Chemistry Council

3.Reuters

4.PE Hub

5.ICIS

6.CNBC

7.Factset