Mergers & Acquisitions in the Chemicals Industry

The corporate landscape in 1989
Early days - technology the driver
Orderly market
The first world war and its aftermath
The creation of the new order
The inter-war years and cartel
Petrochemicals brings new player
The German industry reborn
Developments in Japan
The golden years for petrochemical growth

Market maturity
The new producer
Shareholder power
Regulatory pressure
The resultant pressure on margin
The resultant poor performance of chemical stock
Management responses - focu
Management responses - globalisation

Introduction
The chemical sector M&A table
Recent M&A activity in its historic context
1990-96: Thoughts turn to restructuring
M&A activity in the years 1997-99
High activity levels in specialty chemical
Broad spread of activity outside specialtie
The analysis of deals by region
Only one true merger?
The role of private equity capital
Veba and Viag create a new industry giant
Newly created business joint venture
Consolidation in the oil sector
The failed deal

Part 1: How businesses are valued
Part 2: The valuations placed on recent M&A deals

The pending deals

The new order
Value creation rather than size is the goal
Is there a formula for success?
The life science companie
The specialty chemical companie
The commodity petrochemicals and plastics sector
Broadly based or focused?
Japanese chemicals - coming to terms with its legacy

Case study 1: DSM and Gist-brocades Case study 2: The small company dilemma - Blagden Plc
Case study 3: Pharmaceutical intermediates and active
Case study 4: Consolidation in polyolefin
Case study 5: Hercules and BetzDearborn Case study 6: Private equity funding and Avecia

Table 1.1: Industry majors of 1989 and their origin
Table 1.2: Chemical growth rates in the OECD countrie
Table 1.3: Chemical and industrial growth 1958-68
Table 2.1: Output growth and the chemical premium
Table 2.2: Chemical output and demand 1989-96
Table 2.3: Chemical industry output indices (1992 = 100)
Table 2.4: Output of the OECD area (% of world output) 1970
Table 2.5: The broadly based chemical companies: spin-offs and demergers 1992-99
Table 2.6: The chemical businesses of the oil majors 1998
Table 2.7: Chemicals and the oil majors 1998
Table 2.8: The chemical interests of the diversified manufacturing companie
Table 2.9: Focusing moves by the diversified group
Table 2.10: Dependence on domestic sales in 1978 and 1998
Table 2.11: Globalisation of majors (1998)
Table 2.12: Globalisation of Japanese majors (1998/99)
Table 3.1: 1997 category 1 acquisitions and disposal
Table 3.2: 1997 category 2 acquisitions and disposal
Table 3.3: 1997 category 3 acquisitions and disposal
Table 3.4: 1997 category 4 acquisitions and disposal
Table 3.5: 1998 category 1 acquisitions and disposal
Table 3.6: 1998 category 2 acquisitions and disposal
Table 3.7: 1998 category 3 acquisitions and disposal
Table 3.8: 1998 category 4 acquisitions and disposal
Table 3.9: 1999 category 1 acquisitions and disposal
Table 3.10: 1999 category 2 acquisitio ns and disposal
Table 3.11: 1999 category 3 acquisitions and disposal
Table 3.12: 1999 category 4 acquisitions and disposal
Table 3.13: Analysis of deals by value ($m)
Table 3.14: Analysis of deals by sector ($m)
Table 3.15: Analysis of deals by region ($m)
Table 3.16: Deals involving private equity 1997-99
Table 3.17: The major new business joint ventures 1997-99
Table 3.18: DuPont's polyester joint ventures 1999
Table 3.19: Oil sector chemical interests and consolidation (1998 sales in $bn)
Table 4.1: Valuation of deals - specialty chemical
Table 4.2: Valuation of deals - specialty plastics and resin
Table 4.3: Valuation of deals - coating
Table 4.4: Valuation of deals - broadly based companie
Table 4.5: Valuation of deals - other sector
Table 4.6: Valuation of deals - summary
Table 4.7: Bid premiums in recent quoted company deal
Table 5.1: Acquisitions and disposals pending as at the end of November 1999
Table 6.1: Leading companies by sales 1998 ($bn)
Table 6.2: Leading companies by pro-forma sales 1998 ($bn)
Table 6.3: The life sciences sales of chemical companie
Table 6.4: Specialty chemical sales (1998 pro-forma $bn)
Table 6.5: Broad specialty chemical sales (1998 pro-forma $bn)
Table 6.6: The leading focused broad specialty chemical groups (1998 pro-forma sales $bn)
Table 6.7: Global petrochemicals and plastics majors based on pro-forma 1998 sales ($bn)
Table 6.8: Portfolio classification - sales by category (%) based on pro-forma 1998 sales ($bn)
Table 6.9: The Japanese majors - broadly spread portfolio
Table 7.1: Outsourcing intentions of the pharmaceutical major
Table 7.2: European polyethylene - structure and capacity
Table 7.3: European polypropylene - structure and capacity
Table 7.4: Capacity concentration in European PE and PP
Table 7.5: Hercules adjusted P&l
Table 7.6: BetzDearborn and Nalco cost profiles (as % sales)

Figure 2.1: The drivers of change
Figure 2.2: Contributions to demand growth 1989-96 ($bn)
Figure 2.3: World production of man-made fibre
Figure 2.4: Regional ethylene capacities 1998
Figure 2.5: Cyclical company margin
Figure 2.6: European margin
Figure 2.7: US margin
Figure 2.8: Poor stock performance in the US, UK and Germany
Figure 3.1: M&A activity v sector profitability
Figure 3.2: Reserves v market capitalisation
Figure 3.3: Chemical sales of the new oil order ($bn)
Figure 4.1: Contribution analysis - CK Witco
Figure 6.1: World agrochemical major
Figure 6.2: The new order in specialty chemical
Figure 6.3: The old order in specialty chemicals (1998)
Figure 6.4: Global petrochemical major
Figure 7.1: Number of polyolefin producers in Western Europe
Figure 7.2: Global polyethylene majors 1998
Figure 7.3: Global polyethylene majors 1999
Figure 7.4: Hercules EBITDA margins (%)