Global chemicals deals insights: Q3 2019

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Executive summary

Chemicals industry deal activity declined on a value basis to the lowest level in the last three years. Deal volumes increased quarter-over-quarter but declined year-over-year. These declines were mainly attributable to the ongoing geopolitical tensions, trade disputes, and concerns over a slowing global economy. The largest announced transaction during the quarter was Indorama Ventures’ acquisition of Huntsman’s Chemical intermediates business unit for ~$2.1 billion. The Specialty Chemicals sub-sector continues to attract the highest valuations and interest amid diminishing supply.

chemicals-deal-summary

“As chemical companies evaluate their business and M&A strategy it continues to be essential to assess and understand the impact geopolitical tensions and proposed regulations could have on supply chains, customers, and overall profitability for both acquisitions and divestitures.”

Craig Kocak, US Chemicals Deals Leader

Trends and highlights

  • Deal value in Q3 2019 declined by 10% to $10.6 billion over Q2 2019. Similarly in YTD 2019, the deal value declined by 15% to $110.9 billion over YTD 2019.
  • In Q3 2019, deal volume increased by 15% to 213 deals when compared to Q2 2019. But for YTD 2019, deal volume declined by 13% to 588 deals vis-à-vis YTD 2018.
  • Average deal size for Q3 2019 declined by 21% to $96.7 million over Q2 2019. But the average deal size for YTD 2019 slightly increased by 2% to $367.2 million when compared to YTD 2018.
chemicals-deals-trends-highlights

Highlights of deal activity

chemicals-deals-activity-overview
chemicals-deals-activity-chart

Key announced transactions (YTD 2019)

Announced

Target name

Target nation

Acquirer name

Acquirer nation

Status

Deal value*

Category

03/27/19

Saudi Basic Industries Corp. SJSC

Saudi Arabia

Saudi Arabian Oil Co.

Saudi Arabia

Pending

69,104

Diversified and Other

02/27/19

Versum Materials Inc.

United States

Merck KGaA

Germany

Pending

5,799

Specialty Chemicals

04/29/19

LORD Corp.

United States

Parker Hannifin Corp.

United States

Pending

3,675

Specialty Chemicals

03/04/19

Evonik Industries AG-Methacrylates Business

Germany

Advent International Corp.

United States

Completed

3,412

Specialty Chemicals

04/17/19

DuluxGroup Ltd.

Australia

Nippon Paint Holdings Co. Ltd.

Japan

Completed

2,617**

Specialty Chemicals

01/08/19

Financiere Dry Mix Solutions SAS

France

Sika AG

Switzerland

Completed

2,552

Specialty Chemicals

08/07/19

Huntsman Corp.-Chemical Intermediates Businesses

United States

Indorama Ventures PCL

Thailand

Pending

2,076

Diversified and Other

03/26/19

Zhejiang Huafon New Materials Co. Ltd.

China

Zhejiang Huafon Spandex Co. Ltd.

China

Pending

2,070

Specialty Chemicals

05/30/19

Jiangsu Sailboat Petrochemical Co. Ltd.

China

Danhua Chemical Technology Co. Ltd.

China

Pending

1,702

Commodity Chemicals

03/13/19

Linde Korea Co. Ltd.-Assets

South Korea

Imm Private Equity Inc.

South Korea

Completed

1,200***

Industrial Gases

Source: Thomson Reuters and other publicly available sources. *In Million USD. ** Previously reported as $2,623 in Q2 while the deal was pending. Completed value of $2,617. *** Previously reported as $1,153 in Q1 while the deal was pending. Completed value of $1,200.


Chemicals deals outlook

Overall, as we think about the chemicals sector, current global economy, and valuations a few themes come to mind which we think will shape chemicals deal trends for the remainder of 2019 and into 2020.

First, we are continuing to see the evolution of the strategies beginning to take shape from the flurry of megadeals over the past three years. In most cases the strategies taking shape involve a focus on scaling the “core” and spinning off or divesting of the non-core businesses. We believe the activity of these large global diversified companies will continue to shape the chemicals M&A environment.  

Second, Chinese buyers will continue to remain domestically focused. With the ongoing trade disputes and unknowns surrounding tariffs, regulations, and other factors that can influence a supply chain; we believe Chinese buyers will remain focused on what they do know—“home assets” and will not actively pursue cross-border deals.

Third, as the flow of privately held top tier specialty businesses has slowed, there is a much smaller supply of these assets that could come available keeping valuations high in the specialty sub-sector even amid the economic uncertainties.  However, this lack of availability could help contribute to flat or declining volumes along with the potential of less desirable assets coming to market, resulting in extended deal process timelines. The Commodity Chemical market valuations have been flat for the last year or two and we would expect to see that trend continue.

For the reasons noted throughout, coupled with the cash available on corporate balance sheets and at private equity, we expect the chemicals market to still be active, but anticipate volumes and valuations to remain flat or to slightly decline in the near future. 

About the data

The information presented in this report is an analysis of deals in the global chemicals industry. Deal information was sourced from Thomson Reuters and includes deals for which targets have an SIC code that falls into chemicals mid-industry group. Certain adjustments have been made to the information to exclude transactions which are not specific to chemicals or incorporate relevant transactions that were omitted from the SIC industry codes.

This analysis includes all individual mergers, acquisitions, and divestitures for disclosed or undisclosed values, leveraged buyouts, privatizations, minority stake purchases, and acquisitions of remaining interest announced between October 1, 2016 and September 30, 2019, with a deal status of completed, partially completed, pending, pending regulatory and pending completion, and excludes all rumors and seeking buyers. Additionally, transactions that are spin-offs through distribution to existing shareholders are included.

Percentages and values are rounded to the nearest whole number which may result in minor differences when summing totals.

Contact us

Kazi Islam

Chemicals Leader, PwC US

Craig Kocak

Chemicals Deals Leader, PwC US

Chris Cardinal

Chemical Deals Strategy Leader, PwC US

Seamus Jiang

Deals Managing Director
China Inbound Deals Leader, PwC US

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