strategic issues
MITSUBISHI RAYON
CONTINUED FROM PAGE 49
the polyethylene and glycols venture
Equate.
As part of the drive to generate
more cash to help fund the Rohm and
Haas acquisition, Dow says it is
looking to sell its interests in some
petrochemicals joint ventures in
Southeast Asia, notably Optimal in
Malaysia and SCG-Dow in Thailand.
To navigate successfully through
an extremely difficult period some
sector companies will want to sell.
One of the most significant recent
deals has been the proposed takeover
of Nova Chemicals by Abu
Dhabi’s International Petroleum
Investment Company (IPIC) for a
total deal value, including debt, of
US$2.3bn. The deal will help Nova
meet its debt obligations and give
the company more stability.
Stability is a commodity
currently in short supply and there
may be more firms forced by
the downturn to sell assets, seek
partners or to be acquired. US
specialities maker Chemtura, for
example, was hoping to announce
asset sales of as much as US$750m
by the end of March, before it
was forced to file for Chapter 11
bankruptcy protection that month.
Forced divestments aside,
acquisition-led growth has been put
to one side by most, but by no
means all, chemical firms. The
drivers of M&A in the down cycle
On track: Mitsubishi Rayon president
Masanao Kambara and Lucite ceo Ian
Lambert announced the deal in November
are different from those at the cycle
peak. Private equity is absent and
no longer a catalyst for sector
restructuring. Industrial players are
seeking to preserve cash against
hard times and for them ambitious
M&A activity is not on the agenda.
Consultants believe, however,
that asset realignment will be
achieved using different vehicles.
Sovereign wealth funds and stateowned
enterprises have been more
active in chemicals M&A in the
recent past and, according to management
consultancy Accenture,
accounted for 19% of pending
acquisitions by December 2009.
They represent a stable source of
funds in these turbulent times, the
consultancy says in a recently
published report. Also, it suggests
that with current low chemical
industry stock prices, such funds
will be prime players in making
large-scale moves around the globe.
Joint ventures are also attractive
through the down cycle, Accenture
suggests, allowing the consolidation
of subsidiaries in particular
product lines or the creation of
greenfield projects where the assets
of the venturing parties can be
used as ‘capital’.
Both routes to grow, however, do
not preclude the moves that some
companies might yet make in purely
strategic terms. This might not be the
best time for most players to make a
significant strategic step, particularly
given the lack of short to medium
term visibility. However, some who
may feel they can see farther than
others, could make the step.
Not surprisingly, however, the
signs of strategic intent are few and
far between. The proposed fertiliser
merger in Japan could be seen as
strategic, but forced by events. That
move aside this could be a time for
players from Asia and the Middle
East to make more of a mark.
So far in 2009 Reliance
Industries has sought to merge
fully with its refining arm, a move
which demonstrates the difficult
times faced by the world’s refiners
as much as the desire in India to
consolidate financially. The fact
that other refiners are seeking to
� To navigate successfully through
an extremely difficult period some
sector companies will want to sell
consolidate operations could put
some petrochemicals production
assets into new hands.
The IPIC/Nova Chemicals deal,
while not overtly strategic, does bring
two polyolefins players, Nova and
Borealis under similar ownership.
Cash-rich entities can play a catalyst
role in the sector while most players
struggle under the burden of recession
and the credit crunch.
The credit crunch has not precluded
all M&A activity but put a
significant damper on most. That
dampening will be felt globally. �
50 Prepared for APIC 2009 by The Chemical Daily and ICIS
To view a Ceros magazine you need to have JavaScript enabled in your browser and have the flash player 8 or higher installed. To install the latest flash player, click the icon above, install the flash plugin and then click here to refresh this page.