Chemicals M&A is on fire Premium
How global chemical dealmaking is reshaping the world
Activist investor Elliott is known for being a patient legal fighter. But it will be hard to hide the pain inflicted on Monday by a Dutch court that knocked down its request to oust Akzo Noble’s chairman, Antony Burgmans, who has opposed engaging with an unwanted €26.9bn takeover approach from US rival PPG Industries.
PPG has been turned away from Akzo Noble three times since March, which means that the only option left for the American paintmaker is to launch a full-blown hostile bid. But what is interesting here is the intensifying battle to consolidate the global chemical industry. Read Michael Pooler’s analysis on the topic here as it offers a lot of insight.
As major economies putted along at a slow pace last year, large chemical makers have looked to buy revenue growth. Announced or completed chemicals deals in 2016 hit $263.6bn including debt, according to data provider Dealogic, compared to $177.4bn in 2015. During that time, chemical deals have reshaped global markets for everything from food production to oil additives.
For example, three agrichemical megadeals have rocked the world of dealmaking recently. With ChemChina’s $44bn takeover of Swiss seed maker Syngenta, many of the world’s top patents for crop seeds will be entrusted to the Chinese government, which controls ChemChina.
PPG’s aggressive activity in the lowlands follows other paint megamergers, such as US paintmaker Sherwin-Williams’ agreement to pay $11.3bn for domestic rival Valspar in March last year. In industrial gases, decades of consolidation was punctuated last week with the finalisation the $70bn merger between Germany’s Linde and Praxair of the US.
With the number of chemical groups shrinking, there’s also likely to be backlash from regulators and shareholders, bankers have warned. DD is watching the splitting of the Dow and DuPont merger as a harbinger of things to come.