Chemicals

Saudi’s sunny debt offer belies gathering clouds

10 January 2019

Riyadh’s successful $7.5 bln bond sale suggests investors have moved on from the Khashoggi murder. Yet long-dated Saudi debt trades at an implied discount to its rating. With the kingdom too optimistic about oil prices and facing peak demand, markets won’t always be so friendly.

Sika pays up to cement its takeover defences

8 January 2019

The Swiss chemicals firm is paying $2.6 bln for France’s Parex. After a lengthy battle with Saint-Gobain, bulking up to dissuade further approaches makes sense. Relying on revenue synergies to make a decent return on its new deal removes some of the gloss, though.

A cooling China may chill Sinochem Energy’s IPO

16 November 2018

The state giant wants to raise up to $2 bln by listing its trading and refining arm in Hong Kong. It can benefit from lower oil prices. But squeezed margins, volatile markets and jitters over demand at home won’t help. Smart pricing and Beijing’s support will make the difference.

DowDuPont needs its breakup more than ever

31 October 2018

Recession fears and a writedown have burned off a quarter of the chemical giant’s value. It’s too strong a reaction: its businesses won’t suffer equally in a downturn. Dow’s worth some $175 bln, 40 pct above its current value. Next year’s three-way split should crystallize that.

Smiths wobble fortifies case for more surgery

21 September 2018

The $8 bln engineer reported its first sales growth in five years, but the shares fell due to a weaker-than-expected outlook. After rejecting a sale of its medical unit, CEO Andy Reynolds is pruning assets and investing. That may not be enough to close a steep valuation discount.

Saudi-Clariant chemical deal is murky concoction

18 September 2018

The Swiss group is setting up a joint venture with 25 pct shareholder Saudi Basic Industries. At the same time SABIC will contribute a new Clariant CEO and four board directors. Though the venture should make sense, the company’s governance becomes more complicated.

Chinese mega-merger should catalyze chemical M&A

1 August 2018

A changing of the guard at ChemChina suggests a Sinochem deal is getting closer. At more than $100 bln in annual revenue, the resulting giant would be on par with DowDuPont. Some forced sales may result, but Beijing's ambition will keep the focus squarely on more buying.

Indian buyer sows better outbound M&A seeds

23 July 2018

In the country’s biggest overseas deal in years, UPL will double in size acquiring Platform Specialty’s agrochemicals unit for $4.2 bln. Backing from TPG and ADIA help, and there’s no risky bridge loan. The Shroff family may outdo other local tycoons who have ventured abroad.

Aramco’s downstream diversion solves few problems

19 July 2018

Buying a stake in petrochemical maker SABIC would enable the Saudi oil giant to diversify its business. But it complicates the government’s plans to open state companies to private capital. And the holding is too small to pump up Aramco’s valuation in an initial public offering.

DSM extracts vigorous returns from healthy planet

20 June 2018

The Dutch company which once mined coal now makes food supplements and fibres. New targets suggest sustainable businesses can deliver high single-digit EBITDA growth. Though investors’ expectations are already high, up to 3 bln euros for acquisitions promises a further boost.

DSM has ingredients for long-term health

12 April 2018

Shares in the Dutch vitamin and chemicals group hit a record high after it reported strong first-quarter sales. A fire at German rival BASF’s plant cut supply, prompting a spike in vitamin E prices. A healthy underlying business shows the valuation boost needn’t be temporary.

Bayer investors get unwelcome antitrust present

10 April 2018

The German company has struck a deal with U.S. regulators to clear its $60 billion acquisition of seed group Monsanto, the Wall Street Journal reported. After EU approval in March, a two-year saga is almost over. Bayer’s sagging stock price means shareholders can hold the cheers.

Carlyle’s $12.6 bln Akzo deal has good chemistry

27 March 2018

The U.S. private equity group is buying a speciality chemical unit that the Dutch company put on the block after a failed PPG bid. Carlyle knows the industry and has slashed costs at Axalta. While there may be less scope for huge cuts this time, decent returns are still on offer.

DowDuPont stock lacks activist chemistry

14 February 2018

The $166 bln industrial group is exceeding revenue estimates and planned merger cost cuts. Crunching two companies together and splitting into three should be worth more, according to activist Dan Loeb last year. He has gone quiet – and investors seem to have forgotten the story.

Bull market lets activists see virtue in passivity

26 January 2018

Bill Ackman, who lost his fight with ADP, has taken a stake in Nike but isn’t pushing for change. Dan Loeb sat back as Honeywell’s new boss ignored his advice and beat his targets anyway. Even pushy hedge funds can be tempted to simply ride the waves when a rally lifts all boats.

Activists beat bearable retreat in Clariant feud

25 January 2018

White Tale has surprisingly sold its stake in the Swiss chemical maker to SABIC. That may be a recognition its bid to shake up the group would fail. Exiting now may leave some money on the table, but the hedge fund consortium has probably made a decent return.

BASF’s odd oil deal may create a valuable compound

8 December 2017

The 87 bln euro German chemicals firm agreed to merge its oil unit with Russian billionaire Mikhail Fridman’s DEA. It’s a complex transaction, with a messy structure. Yet pooling the business will create savings and may eventually help BASF shed its huge conglomerate discount.

BASF oil exit belatedly admits flaws of diversity

27 November 2017

The chemicals giant may merge its oil and gas unit with DEA, owned by Russian billionaire Mikhail Fridman, before an IPO. Cost savings of 1 bln euros partly make up for low oil prices. A broader lesson is that when companies try to span different industries, shareholders suffer.

Clariant and activist lack a positive reaction

24 November 2017

The Swiss chemical maker will devise a new strategy after its merger with rival Huntsman flopped. It rejected demands from White Tale to explore a breakup. Clariant cannot ignore its 20 pct shareholder, but the activist that scuppered the deal needs to propose as well as oppose.

Akzo’s no-deal still worse than a good deal

22 November 2017

The Dutch paint maker is temporarily solo after talks with U.S. peer Axalta foundered. That combination, good on paper, was challenged by the two companies’ uneven size and likely job cuts. Even so, Akzo’s future if it’s determined to remain single is unappealing.