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Chemical Industry Specialty Chemical Round-up, June 30
3:12 AM MDT | July 1, 2011 | By KERRI WALSH
More M&A news came out of the specialty chemical sector this week, proving that the sector is ripe for consolidation, and buyers want to bulk up core operations. AkzoNobel has offered to acquire German coatings manufacturer Schramm Holding and the coatings activities operated by Schramm's largest shareholder, Korean company SSCP. The deal will strengthen AkzoNobel’s its global leadership position in the specialty plastic coating market. Schramm manufactures and markets coatings for plastics, metals, and electrical insulation. The company’s sales have grown by 18%/year during the last three years. Schramm reported 2010 Ebitda of €13.3 million, on sales of €115 million. SSCP has a strong position in the Korean mobile phone market and also supplies coatings to the wider consumer electronics industry. More than half of the combined revenues of Schramm and SSCP are in Asia, primarily in China, Korea, Vietnam, and Thailand.
W.R. Grace, which has been operating under bankruptcy protection since April 2001, is seeking court permission to keep private the details of a “highly confidential potential strategic transaction” the company is pursuing. Grace started due diligence on the acquisition in May, according to bankruptcy court filings last week. The proposed deal “would significantly enhance Grace’s business plan and growth strategy in the coming years,” Grace says. The company petitioned the U.S. bankruptcy court to file materials related to the deal under seal to keep details confidential. The filing did not identify the seller nor the line of business, and Grace declined further comment on the potential deal.
Clariant says it has initiated a squeeze-out process, according to the German Public Company Act, to acquire all the remaining shares in Sud-Chemie held by minority shareholders. Clariant already owns 98.64% of the share capital of Sud-Chemie. The squeeze-out is subject to approval at a general meeting of Süd-Chemie and the resolution is to be passed at an extraordinary general meeting, which is expected to take place before the end of 2011, the companies say.
Raw material costs continue to rise for specialty chemical makers. AkzoNobel issued a profit warning on June 27 because the company does not believe it will be able to reach an Ebitda increase of 5% for the full year in 2011 partly due to rising costs. AkzoNobel's sales targets, however, are on track. “Revenue development year-to-date has met the company's expectations [but second quarter] results will be adversely impacted by ongoing challenging trading conditions and one-off factors,” the company says. Recent performance has continued to be impacted by further raw material price inflation in the second quarter and, as a result, sequential second quarter contribution margins are expected to be flat compared with the first quarter, the company says. Year-on-year raw material prices are estimated to be about 20% higher.
Cytec has renewed its $400 million credit agreement with some amendments, the company says. A $25 million swing line loan was added to the agreement, and the maturity was extended to June 2016. A swing line loan is similar to a credit line, but must be used to pay down other debt. Cytec may also increase the size of the credit line to $500 million and extend the maturation date to June 2019, provided the company meets the agreement's covenants, the company says.