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Chemical Finance Digest, Oct. 17-21
October 25, 2011 | By VINCENT VALK
Topping the headlines last week, earnings season is getting into full swing, and reports have been mixed thus far. AkzoNobel’s net income fell 32%, while PPG’s income rose 19% though volumes were flat. Air Products’ earnings rose 10.5%, and Rockwood’s rose 46%.
In M&A news, pipeline operator Kinder Morgan announced plans to acquire El Paso Corporation for $38 billion, including debt. The deal will create the largest natural gas pipeline network in the U.S., with 67,000 miles of pipeline and an enterprise value of $94 million. The deal values El Paso at $26.87/share, a 47% premium. Meanwhile, Lonza's $1.4 billion acquisition of Arch Chemicals closed, and the company listed on the Singapore stock exchange.
LyondellBasell announced plans to buy back $2.8 billion in debt, and pay $2.6 billion one-time dividend. The dividend, the timing of which has not been disclosed, would represent a 17% premium on LyondellBasell’s share price. The company is flush with cash, with $6 billion in reserves, and having generated about $1 billion during the second-quarter alone.
In response to the debt buyback, Moody’s Investors Service has put LyondellBasell under review for a potential upgrade. The company, which as explicitly stated that it aims to achieve an investment grade rating, is currently rated ‘Ba2,’ two notches below investment grade.
In macroeconomic news, U.S. housing starts rose 15% in September, to a 658,000 annual rate, the best showing in 17 months. However, permits, which are more useful as a predictive indicator, fell 5%, to a 594,000 annual rate. “The increase in starts is good for GDP growth and jobs. The drop in permits indicates that September’s gains are unsustainable. The report does not change the current direction of the housing market—a flat single-family market and a slowly improving multi-family market,” says IHS Global Insight economist Patrick Newport
The week ahead will see a whole lot of earnings. Here’s a list of some of the big names in the industry that report this week:
Tuesday: DuPont, 3M, Celanese, Ecolab, Albemarle, Cabot
Wednesday: Praxair, Compass Minerals, Ferro, A. Schulman, Methanex
Thursday: Dow Chemical, BASF, Eastman Chemical, Bayer
Outside earnings, U.S. GDP figures for the third-quarter will be released on Thursday. Consensus is for 2.5% growth.