Evonik Picks Top-Priced Targets in Chemical Deals Hunt: Real M&A
2014-11-03 00:00:01.2 GMT
(For a Real M&A column news alert: SALT REALMNA <GO>.)
By Brooke Sutherland
Nov. 3 (Bloomberg) -- Evonik Industries AG may find it’s
tough to be a buyer in a seller’s market.
Royal DSM NV, Clariant AG and Croda International Plc have
made the German chemical maker’s short list as it seeks a large
European takeover target, according to people familiar with the
matter. Despite the companies’ lackluster returns this year, all
three still trade at a premium to the median profit multiple
paid for recent chemicals deals, according to data compiled by
Bloomberg.
European chemical companies have gotten more expensive over
the last three years, with an index of 25 companies including
Clariant, Croda and DSM reaching a peak valuation in July.
Symrise AG, which makes flavors and fragrances, is even more
expensive than the other targets, but would best fill the holes
in Evonik’s portfolio, according to DZ Bank AG. If the valuation
is too high, Clariant looks better than DSM because it’s half
the size.
“It’s a good time for the sellers, but it’s not a good
time for the buyers,” Peter Spengler, a Frankfurt-based analyst
at DZ Bank, said in a phone interview. “It’s not peak valuation
now but it’s a little bit below peak.”
Evonik’s Revamp
Evonik is looking for deals that will help it expand into
less volatile, higher-margin businesses, after sales declined.
The company has been reorganizing to decrease sensitivity to
price swings.
Chief Financial Officer Ute Wolf said last month that the
Essen-based company has the resources to execute a “sizeable”
acquisition. Evonik will focus on deals that strengthen the
consumer, health and nutrition unit and the resource efficiency
division.
The maker of cosmetic ingredients is talking with advisers
about a potential deal with DSM and also evaluating companies
such as Croda and Clariant, according to people familiar with
the matter, who asked not to be identified because discussions
are private.
Even before accounting for a takeover premium, those three
targets are already expensive by some measures. They trade at an
average of 10.2 times earnings before interest, taxes,
depreciation and amortization. In the last five years, buyers
paid a median profit multiple of 8.8 for chemical companies in
deals larger than $1 billion, according to data compiled by
Bloomberg.
Clariant on Top
Among those three, Clariant “would be the best potential
target,” based on its size and what Evonik can afford, said
Spengler of DZ Bank. Clariant has the lowest profit multiple of
the three, trading at 9.1 times its Ebitda in the last year.
Clariant Chief Executive Officer Hariolf Kottmann has
revamped the company, which makes petrochemical catalysts and
shampoo ingredients, to improve profitability and focus more on
less-volatile specialty chemicals. Analysts project that net
income will rise next year to the highest level in more than a
decade and that free cash flow will jump to more than $400
million by 2016, according to data compiled by Bloomberg.
“Clariant really stands out,” Brian Hennessey, a fund
manager at Purchase, New York-based Alpine Woods Capital
Investors LLC, which oversees about $4.5 billion including
Clariant shares, said in a phone interview. The $5.8 billion
company will have “good free cash flow generation and a product
portfolio that’s defensively oriented but with still decent
growth.”
Symrise, which makes perfume oils and flavors for ice cream
and snack food, would be an ideal supplement to Evonik, said
Spengler of DZ Bank. Its operating margin, at 16 percent, is
about double Evonik’s. The only problem is Symrise is even more
expensive, with an Ebitda multiple of 15.
Go Small
Evonik will probably focus on niche acquisitions instead,
said Ronald Koehler, a Frankfurt-based analyst at MainFirst Bank
AG. That makes more strategic sense than a transformational
takeover of a conglomerate such as DSM, he said. Those kinds of
deals may also be cheaper.
“It’s potentially not the best time, but the industry is
thinking differently than portfolio managers,” Koehler said in
a phone interview. “They’re buying when they have cash and they
definitely right now have cash. At the end of the day, it’s also
availability, which is necessary.”
For Related News and Information:
Evonik Seeks Growth Through Acquisitions Amid Investment Cut
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Evonik Said Exploring DSM Takeover Amid Chemical Deals Hunt
NSN NE9K1V6K50Y6 <GO>
Clariant Revamp Makes Chemical Maker Target for BASF: Real M&A
NSN NCSFSC6JTSEG <GO>
Top Deal Stories: DTOP <GO>
M&A Search: MA <GO>
To contact the reporter on this story:
Brooke Sutherland in New York at +1-212-617-0448 or
bsutherland7@bloomberg.net
To contact the editors responsible for this story:
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net
Whitney Kisling
2014-11-03 00:00:01.2 GMT
(For a Real M&A column news alert: SALT REALMNA <GO>.)
By Brooke Sutherland
Nov. 3 (Bloomberg) -- Evonik Industries AG may find it’s
tough to be a buyer in a seller’s market.
Royal DSM NV, Clariant AG and Croda International Plc have
made the German chemical maker’s short list as it seeks a large
European takeover target, according to people familiar with the
matter. Despite the companies’ lackluster returns this year, all
three still trade at a premium to the median profit multiple
paid for recent chemicals deals, according to data compiled by
Bloomberg.
European chemical companies have gotten more expensive over
the last three years, with an index of 25 companies including
Clariant, Croda and DSM reaching a peak valuation in July.
Symrise AG, which makes flavors and fragrances, is even more
expensive than the other targets, but would best fill the holes
in Evonik’s portfolio, according to DZ Bank AG. If the valuation
is too high, Clariant looks better than DSM because it’s half
the size.
“It’s a good time for the sellers, but it’s not a good
time for the buyers,” Peter Spengler, a Frankfurt-based analyst
at DZ Bank, said in a phone interview. “It’s not peak valuation
now but it’s a little bit below peak.”
Evonik’s Revamp
Evonik is looking for deals that will help it expand into
less volatile, higher-margin businesses, after sales declined.
The company has been reorganizing to decrease sensitivity to
price swings.
Chief Financial Officer Ute Wolf said last month that the
Essen-based company has the resources to execute a “sizeable”
acquisition. Evonik will focus on deals that strengthen the
consumer, health and nutrition unit and the resource efficiency
division.
The maker of cosmetic ingredients is talking with advisers
about a potential deal with DSM and also evaluating companies
such as Croda and Clariant, according to people familiar with
the matter, who asked not to be identified because discussions
are private.
Even before accounting for a takeover premium, those three
targets are already expensive by some measures. They trade at an
average of 10.2 times earnings before interest, taxes,
depreciation and amortization. In the last five years, buyers
paid a median profit multiple of 8.8 for chemical companies in
deals larger than $1 billion, according to data compiled by
Bloomberg.
Clariant on Top
Among those three, Clariant “would be the best potential
target,” based on its size and what Evonik can afford, said
Spengler of DZ Bank. Clariant has the lowest profit multiple of
the three, trading at 9.1 times its Ebitda in the last year.
Clariant Chief Executive Officer Hariolf Kottmann has
revamped the company, which makes petrochemical catalysts and
shampoo ingredients, to improve profitability and focus more on
less-volatile specialty chemicals. Analysts project that net
income will rise next year to the highest level in more than a
decade and that free cash flow will jump to more than $400
million by 2016, according to data compiled by Bloomberg.
“Clariant really stands out,” Brian Hennessey, a fund
manager at Purchase, New York-based Alpine Woods Capital
Investors LLC, which oversees about $4.5 billion including
Clariant shares, said in a phone interview. The $5.8 billion
company will have “good free cash flow generation and a product
portfolio that’s defensively oriented but with still decent
growth.”
Symrise, which makes perfume oils and flavors for ice cream
and snack food, would be an ideal supplement to Evonik, said
Spengler of DZ Bank. Its operating margin, at 16 percent, is
about double Evonik’s. The only problem is Symrise is even more
expensive, with an Ebitda multiple of 15.
Go Small
Evonik will probably focus on niche acquisitions instead,
said Ronald Koehler, a Frankfurt-based analyst at MainFirst Bank
AG. That makes more strategic sense than a transformational
takeover of a conglomerate such as DSM, he said. Those kinds of
deals may also be cheaper.
“It’s potentially not the best time, but the industry is
thinking differently than portfolio managers,” Koehler said in
a phone interview. “They’re buying when they have cash and they
definitely right now have cash. At the end of the day, it’s also
availability, which is necessary.”
For Related News and Information:
Evonik Seeks Growth Through Acquisitions Amid Investment Cut
NSN NCTCM66KLVR6 <GO>
Evonik Said Exploring DSM Takeover Amid Chemical Deals Hunt
NSN NE9K1V6K50Y6 <GO>
Clariant Revamp Makes Chemical Maker Target for BASF: Real M&A
NSN NCSFSC6JTSEG <GO>
Top Deal Stories: DTOP <GO>
M&A Search: MA <GO>
To contact the reporter on this story:
Brooke Sutherland in New York at +1-212-617-0448 or
bsutherland7@bloomberg.net
To contact the editors responsible for this story:
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net
Whitney Kisling