Partner Kirk Mcintosh comments in the FT on the global wave of deals in the chemicals sector

Tuesday, 30 May 2017 | Michael Pooler

Hunt for earnings growth reshapes chemicals sector

Wave of deals across the diverse industry is being spurred by chance to cut costs.

From cosmetics ingredients to pillow foam, and from paints to crop sprays, a chain reaction of deals is coursing through an industry that makes many of the world’s everyday products as well as key materials that go into them.
The list of large transactions that has spread through the chemicals sector expanded just last week, with the proposed merger between Switzerland’s Clariant and Huntsman Corporation of the US.
The combined group — valued at $20bn including debt — would aim to become a leader in the area of speciality chemicals, with products ranging from industrial adhesives to colourants for lipstick.

It follows a succession of blockbuster deals, which kicked off 18 months ago with a transaction involving the two largest chemicals companies in the US:
Dow Chemical’s agreed $69bn takeover of DuPont.
Deals to buy chemicals groups that were either announced or completed in 2016 had an aggregate value of $263.7bn including debt, according to data provider Dealogic, compared with $177.4bn in 2015, when the figures were dominated by the DowDuPont transaction.
This slew of dealmaking is reshaping a hugely diverse sector that has struggled with weak demand due to the lacklustre economic recovery since the global
financial crisis.

“Fundamentally it’s very difficult for chemicals companies to grow faster than [gross domestic product], except in niches,” says Kirk McIntosh, partner at the Valence Group, a specialist investment bank.

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