chemicalsleaguepark.com/.../chemicals-market-update-january-2019.pdf · 2019. 7. 23. · the...

© 2019 League Park Advisors1100 Superior Avenue East Suite 1700 Cleveland, OH 44114 | 216.455.9985 PHONE | 216.455.9986 FAX | www.leaguepark.com

CHEMICALSMARKET UPDATE | January 2019

CHEMICALS JANUARY 2019 MARKET UPDATE

INTRODUCTION

League Park Advisors is pleased to share its chemicals market update for January 2019. This report provides analysis and commentary related to the following topics:

Current market news and observations

Trends in chemicals market valuations

Overview of merger and acquisition dynamics within the domestic chemicals market

We hope that you find our January 2019 edition helpful and invite you to contact us directly if you wish to discuss our perspective on current market trends or our relevant industry experience.

1

OUR FIRM

League Park is a boutique investment bank that professionally and ethically advises clients on strategies aimed to maximize shareholder value. We assist middle market companies with transactions that generate value through mergers and acquisitions, recapitalizations, capital raising, structured finance, and outsourced corporate development.

REPRESENTATIVE LEAGUE PARK CHEMICALS EXPERIENCE

League Park has developed substantial, directly-relevant experience executing transactions and conducting proprietary research across five primary sectors, as well as a broad spectrum of verticals.

BUSINESS SERVICES

CONSUMER& RETAIL

HEALTHCARE INDUSTRIAL TECHNOLOGY

Business ProcessOutsourcing

Data & DocumentManagement

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Industrial Services Specialty

Distribution Transportation &

Logistics

Consumer Products Consumer Services Direct Marketing Food Products &

Services Pet Products Retail

BenefitsManagement

Facility Services Healthcare

Distribution Healthcare IT Healthcare Products Healthcare Staffing Medical Devices &

Equipment

Automotive Building Products Capital Goods Construction Packaging Metals Niche

Manufacturing Polymers Specialty

Chemicals

Big Data Analytics Business

Intelligence Mobile Applications Outsourced

TechnologySolutions

Tech-EnabledConsulting

Sell-Side M&A Advisory

has been acquired by

Strategic Advisory

Strategic Advisory







After over two years of negotiation and overcoming regulatory hurdles, Linde AG and Praxair have announced the completion of their $90 billion mega-merger following recent U.S. Federal Trade Commission and European Commission approval. The newly formed holding company, Linde plc, is now the largest industrial gas supplier in the world. The company has commenced trading on the NYSE under the ticker LIN. Although the businesses have been successfully combined in legal terms, the companies must continue to finalize divestitures stemming from antitrust regulation in order to consolidate their operations. Linde AG and Praxair are required to operate separately and independently until such divestitures are completed.

LINDE-PRAXAIR MERGER CLOSED ON PAPER

GASWORLD OCTOBER 31, 2018


IN THE NEWS

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The American Chemistry Council (“ACC”) reported a strong start to the fourth quarter for the U.S. specialty chemicals market. Across the 28 specialty chemicals segments covered by the ACC, average market volumes increased by approximately 0.3% in October, following gains of 0.4% and 0.6% in September and August, respectively. Of the 28 market segments, three markets experienced volume increases in excess of 1.0%, including the foundry chemicals, lubricant additives, and textile specialties markets. On a year-to-date basis, the best performing market segment is in oilfield chemicals, which has surged in volume by 15.0% as of October 31, 2018.

U.S. SPECIALTY CHEMICALS MARKET VOLUME ON THE RISE

AMERICAN CHEMISTRY COUNCIL NOVEMBER 29, 2018

Just two months after the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”) was instituted, the U.S. Department of the Treasury has launched a pilot program to monitor foreign investment transactions in certain U.S. industries. The program will be overseen by the Committee on Foreign Investment in the United States (“CFIUS”). Under the restrictions set forth, foreign investors seeking minority interests in “critical technology markets” will be required to file declarations with the CFIUS or be subject to monetary penalties up to the value of the transaction. Failure to submit a declaration also allows CFIUS to recommend that the President legally unwind a transaction. The Committee listed inorganic chemicals and petrochemical manufacturing as “Pilot Program Industries”. Several downstream chemical market segments will also be affected. The pilot stands as an additional hurdle for foreign investment in U.S. businesses, particularly in the chemicals industry.

TOUGHER REGULATION ON FOREIGN INVESTMENT IN CERTAIN U.S. INDUSTRIES

DORSEY & WHITNEY OCTOBER 23, 2018

The U.S. has removed 142 chemical and plastic products from the extensive list of tariffed Chinese goods. The tariff exemption covers five groups of critical rare-earth elements of which China is the main supplier, along with 98 organic chemicals. The critical elements are used to create fluid-catalytic-cracking units that are used in refineries to produce gasoline and refinery-grade propylene. After factoring for exemptions, the list still covers 1,363 chemical and plastic products worth over $12.9 billion dollars, according to the ACC.

U.S. REVISES TARIFF LIST ON CHEMICAL & PLASTIC PRODUCTS

ICIS SEPTEMBER 18, 2018


ECONOMIC ANALYSIS

3

CHEMICALS SECTOR EMPLOYMENTFor the Ten-Year Period Ended November 30, 2018Employment in thousands

Sources: American Chemistry Council (ACC), Bureau of Labor Statistics (BLS), Federal Reserve Bank of St. Louis, Organization for Economic Cooperation & Development (OECD), US Census Bureau

CHEMICAL ACTIVITY BAROMETERFor the Ten-Year Period Ended November 30, 2018

US CHEMICAL SHIPMENTS (MONTHLY)For the Five-Year Period Ended November 30, 2018$ in billions

INDUSTRIAL PRODUCTION INDEXFor the Ten-Year Period Ended November 30, 2018

BUSINESS CONFIDENCE INDEXFor the Ten-Year Period Ended November 30, 2018Baseline confidence level is 100

INDUSTRIAL CHEMICAL INDEXFor the Ten-Year Period Ended November 30, 2018% change in producer price index

700

725

750

775

800

825

850

875

900

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 201860

70

80

90

100

110

120

130

140

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

$55

$58

$61

$64

$67

$70

2013 2014 2015 2016 2017 201875

85

95

105

115

125

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

95

96

97

98

99

100

101

102

103

104

105

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 201850%

60%

70%

80%

90%

100%

110%

120%

130%

140%

150%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018


PUBLIC COMPARABLE ANALYSIS

4

CHEMICALSAs of November 30, 2018$ in millions, except for share prices

Source: Capital IQ

Current % of Enterprise LTM LTM Margins Enterprise Value / LTM

Company Name Price LTM High Market Cap Net Debt Value Revenue EBITDA Gross EBITDA Revenue EBITDA

General Chemical:

DowDuPont $57.85 75.1% $132,722 $27,994 $162,370 $85,944 $16,875 26.1% 19.6% 1.9x 9.6x

BASF 72.93 65.3% 66,983 20,943 88,481 76,185 12,544 30.5% 16.5% 1.2x 7.1x

Eastman Chemical Company 78.82 70.1% 11,038 6,433 17,546 10,137 2,331 26.2% 23.0% 1.7x 7.5x

Celanese Corporation 100.93 84.6% 13,500 2,718 16,620 7,059 1,691 27.9% 24.0% 2.4x 9.8x

FMC Corporation 82.74 83.8% 11,142 2,566 13,739 4,488 1,214 45.0% 27.1% 3.1x 11.3x

Albemarle Corporation 96.32 69.5% 10,230 1,057 11,444 3,311 953 36.8% 28.8% 3.5x 12.0x

Clariant 19.79 67.1% 6,517 1,726 8,416 6,677 919 29.7% 13.8% 1.3x 9.2x

Ashland 81.89 94.5% 5,117 2,235 7,352 3,743 590 28.8% 15.8% 2.0x 12.5x

Wacker Chemie 96.24 48.1% 4,781 782 5,604 5,769 1,016 19.0% 17.6% 1.0x 5.5x

Segment Median 70.1% $11,038 $2,566 $13,739 $6,677 $1,214 28.8% 19.6% 1.9x 9.6x

Industrial & Specialty Gas:

Linde $159.08 94.5% $87,662 $7,712 $95,682 $12,037 $3,961 43.8% 32.9% 7.9x 24.2x

L'Air Liquide 120.87 92.6% 51,533 16,588 68,080 23,590 5,580 61.6% 23.7% 2.9x 12.2x

Air Products and Chemicals 160.87 91.8% 35,316 822 36,457 8,930 2,928 30.7% 32.8% 4.1x 12.5x

Taiyo Nippon Sanso Corporation 16.84 96.4% 7,291 2,533 10,053 5,903 884 35.5% 15.0% 1.7x 11.4x

Versum Materials 34.64 83.8% 3,777 580 4,391 1,372 445 42.6% 32.5% 3.2x 9.9x

Segment Median 92.2% $21,304 $1,678 $23,255 $7,417 $1,906 39.0% 28.1% 3.0x 11.8x

Paints, Coatings & Sealants:

The Sherwin-Williams Company $424.07 88.4% $39,498 $9,490 $48,988 $17,450 $2,897 43.5% 16.6% 2.8x 16.9x

PPG Industries 109.33 89.6% 26,227 3,883 30,208 15,411 2,331 42.0% 15.1% 2.0x 13.0x

Akzo Nobel 83.90 88.7% 21,465 3,137 25,005 10,725 1,071 42.9% 10.0% 2.3x 23.3x

Nippon Paint Holdings Company 35.45 77.0% 11,370 (837) 11,621 5,495 863 39.2% 15.7% 2.1x 13.5x

RPM International 65.95 96.8% 8,753 1,969 10,724 5,436 653 41.3% 12.0% 2.0x 16.4x

Axalta Coating Systems 25.03 75.2% 5,975 3,302 9,379 4,703 900 34.6% 19.1% 2.0x 10.4x

Segment Median 88.6% $16,418 $3,219 $18,313 $8,110 $985 41.7% 15.4% 2.1x 14.9x

Dyes & Organic Pigments:

LANXESS $54.82 64.7% $5,018 $2,899 $9,111 $11,851 $1,756 22.6% 14.8% 0.8x 5.2x

Huntsman Corporation 20.22 56.0% 4,819 2,032 7,857 9,346 1,479 22.8% 15.8% 0.8x 5.3x

DIC Corporation 31.76 79.7% 3,006 2,313 5,568 7,110 736 22.4% 10.3% 0.8x 7.6x

Sensient Technologies Corporation 64.26 82.0% 2,717 729 3,446 1,391 259 33.9% 18.6% 2.5x 13.3x

Ferro Corporation 19.30 75.7% 1,607 808 2,424 1,594 239 28.6% 15.0% 1.5x 10.1x


Specialty Materials:

Compagnie de Saint-Gobain $37.06 67.4% $20,191 $10,844 $31,147 $48,055 $4,820 25.3% 10.0% 0.6x 6.5x

Evonik Industries 27.15 73.0% 12,640 3,539 16,189 17,372 3,101 31.4% 17.9% 0.9x 5.2x

Solvay 108.15 79.2% 11,174 4,046 15,275 12,890 2,267 27.7% 17.6% 1.2x 6.7x

Avery Dennison Corporation 96.40 77.9% 8,359 1,624 9,983 7,126 928 26.8% 13.0% 1.4x 10.8x

Johnson Matthey 37.32 75.5% 7,164 1,359 8,494 19,245 899 6.4% 4.7% 0.4x 9.5x

Cabot Corporation 49.20 71.7% 2,953 854 3,932 3,242 529 23.1% 16.3% 1.2x 7.4x

PolyOne Corporation 33.62 70.8% 2,684 1,156 3,841 3,500 382 21.6% 10.9% 1.1x 10.1x

Rogers Corporation 128.66 69.9% 2,366 87 2,453 865 160 35.6% 18.5% 2.8x 15.4x


Comp Group Median 75.7% $10,230 $2,313 $11,444 $7,126 $1,071 29.7% 16.5% 1.9x 10.1x

MEDIAN ONE-YEAR REVENUE GROWTH (LTM YOY)As of November 30, 2018


GROWTH, PROFITABILITY & VALUATION ANALYSIS

5

MEDIAN THREE-YEAR REVENUE GROWTH (LTM YOY)As of November 30, 2018

Source: Capital IQ

MEDIAN TOTAL ENTERPRISE VALUE / LTM REVENUEAs of November 30, 2018

MEDIAN TOTAL ENTERPRISE VALUE / LTM EBITDA As of November 30, 2018

CHEMICALS GROUP FIVE-YEAR HISTORICAL STOCK PERFORMANCEAs of November 30, 2018% change in closing prices

FIVE-YEAR SEGMENT VALUATION TREND (TEV / EBITDA)As of November 30, 2018

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0%

Specialty Materials

Dyes & Organic Pigments

Paints & Coatings

Industrial & Specialty Gas

General Chemical

0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5%

Specialty Materials


Paints & Coatings


General Chemical

0.0x 0.5x 1.0x 1.5x 2.0x 2.5x 3.0x 3.5x 4.0x 4.5x 5.0x

Specialty Materials


Paints & Coatings


General Chemical

0.0x 2.0x 4.0x 6.0x 8.0x 10.0x 12.0x 14.0x 16.0x 18.0x 20.0x

Specialty Materials


Paints & Coatings


General Chemical

0%

25%

50%

75%

100%

125%

150%

175%

200%

225%

250%

2013 2014 2015 2016 2017 2018

General Chemical Industrial & Specialty Gas

Paints, Coatings & Sealants Dyes & Organic Pigments

Specialty Materials S&P 500

0x

2x

4x

6x

8x

10x

12x

14x

16x

18x

20x

2013 2014 2015 2016 2017 2018

General Chemical Industrial & Specialty GasPaints & Coatings Dyes & Organic PigmentsSpecialty Materials S&P 500


M&A TRANSACTIONS

6

AUGUST – NOVEMBER 2018 CHEMICALS M&A TRANSACTIONS

Source: Capital IQ

Announced

Date Target Market Segment Description Acquirer

Nov-18 Insultab Specialty Materials Manufactures heat shrinkable, non-shrinkable, and custom designed tubing products Pexco

Nov-18 ENP Investments General Chemical Manufactures and distributes amino acids and armament for lawncare management NanoChem Solutions

Nov-18 Polyfil Specialty Materials Manufactures additive concentrates and compounds for polyolefin plastics Kafrit Industries (TASE:KAFR)

Nov-18 Masterpac Specialty Materials Manufactures and distributes corrugated fiberboard cartons and packaging materials VisiPak

Nov-18 Specialty Silicone Products Specialty Materials Manufactures and distributes silicone rubber products for industrial and consumer use Electronic Technologies Group

Oct-18 Advanced Fiber Technology Specialty Materials Manufactures cellulose industrial fiber productsInstalled Building Products (NYSE:IBP)

Oct-18 Apiscent Labs Die & Organic Pigments Produces flavors, fragrances, and pharmaceutical ingredients Kingchem Life Science

Oct-18 AMTEC Less-Lethal Systems Specialty Materials Manufactures and distibutes tactical chemical munitions for law enforcement agencies PACEM Defense

Oct-18 Citadel Industries Paints, Coatings, & Sealants Manufactures custom pressure label materials and tapes Green Bay Packaging

Oct-18 Berry & Associates General Chemical Provides stable isotope labelled nucleosides and phosphoramidites Firmenich

Oct-18 Rapid-Pac. Specialty Materials Manufactures packaging products, including label materials, tapes, and mailing tubes B2B Industrial Packaging

Oct-18 Alva-Tech Specialty Materials Manufactures intumescent fire stop material Specified Technologies

Oct-18 FiberFix Specialty Materials Manufactures pre-impregnated repair wraps, tapes, and patches J-B Weld

Oct-18 HydraMaster General Chemical Manufactures carpet, floor, and upholstery cleaning products Bluefin Global

Oct-18 Crowley Chemical/Rusmar Specialty Materials Manufactures and develops specialty aromatic oil blend used primarily as resin extenders CCR Specialty Chemicals

Oct-18 FAR Research General Chemical Manufactures reagents and intermediates Cyalume Technologies Holdings

Oct-18 Cortec Global Services General Chemical Manufactures corrosion control ingredients Presserv

Oct-18 Materials Sciences Specialty Materials Develops composite material and structures Seemann Composites

Oct-18 Paragon Plastics Specialty Materials Manufactures injection molded and extruded carriers and containers Ashley Industrial Molding

Oct-18 Pacer Technology Paints, Coatings, & Sealants Manufactures and distributes private label solutions Grupo AC Marca

Oct-18 Molded Dimensions Specialty Materials Manufactures precision-molded rubber and cast polyurethane mechanical components ShoreView Industries

Sep-18 TyraTech General Chemical Manufactures and distributes proprietary insect and parasite control products American Vanguard (NYSE:AVD)

Sep-18 Performance Plastics Specialty Materials Manufactures plastic components and liquid crystal polymer resins Asahi/America

Sep-18 Polytek Development Specialty Materials Manufactures liquid molded rubbers and liquid casting plastics and resins Arsenal Capital Partners

Sep-18 Sandream Impact General Chemical Distributes specialty chemicals to the cosmetic, personal care, and nutritional markets Aakash Chemicals and Dyestuffs


M&A TRANSACTIONS, CONTINUED

7

Source: Capital IQ

RECENT LEAGUE PARK CHEMICALS ENGAGEMENTS



Strategic Advisory

Strategic Advisory







Announced

Date Target Market Segment Description Acquirer

Sep-18Resins Business of Rayonier Advanced Materials (NYSE:RYAM)

Specialty Materials Produces chemical resins used in the manufacturing of engineered wood products LRBG Chemicals

Sep-18 Senomyx General Chemical Researches and develops healthy alternative ingredients for the food and beverage industry Firmenich

Sep-18 Trident Components Die & Organic Pigments Manufactures die cast components Sage Metals

Sep-18 Contechem Paints, Coatings, & Sealants Manufactures sapstain control formulations U-C Coatings

Sep-18 Kirkhill-TA Specialty Materials Manufactures and distributes rubber products primarily for the aerospace and defense industries HEXPOL (OM:HPOL B)

Sep-18 Uniseal Paints, Coatings, & Sealants Manufactures specialty adhesives and sealants LG Chem (KOSE:A051910)

Sep-18 Xstriva dba. The Amarna Company General Chemical Manufactures water-based release agents Vantage Specialty Chemicals

Sep-18 Parco Specialty Materials Manufactures and distributes custom molded rubber seals and O-rings Dätwyler Holding (SWX:DAE)

Sep-18 SI Group General Chemical Manufactures a large portfolio of chemical intermediates, specialty resins, and solutions Addivant USA

Aug-18Jayhawk Fine Chemicals Business of Evonik

General Chemical Provides custom manufacturing services for fine chemicals Permira Advisers

Aug-18 ACH Foam Technologies Specialty Materials Manufactures and distributes expanded polystyrene (EPS) products Atlas Roofing

Aug-18 Laticrete Supercap Specialty Materials Manufactures self leveling underlayments and skimcoat products LATICRETE

Aug-18 KMG Chemicals General Chemical Manufactures and distributes specialty chemicals primarily to clean silicon wafersCabot Microelectronics (NasdaqGS:CCMP)

Aug-18 Pioneer Metal Finishing General Chemical Distributes metal finishing products to equipment manufacturers Aterian Investment Partners

Aug-18 Premier Material Concepts Specialty Materials Manufactures custom, high-performance plastic sheet and roll stock SIMONA (DB:SIM)

Aug-18 Xerium Technologies Specialty Materials Manufactures forming fabrics used in industrial applications, such as paper-making machines Andritz (WBAG:ANDR)

Aug-18 Tomken Plastic Technologies Specialty Materials Manufactures plastic injection molds and offers engineering services for industrial applications Quality Models

Aug-18 W.F. Taylor Paints, Coatings, & Sealants Manufactures and distributes flooring adhesives, sealers, epoxy systems, and chemical agents Meridian Adhesives Group

Aug-18 Washing Systems General Chemical Manufactures wash-aisle chemistry, wastewater treatment, and specialty chemicals products Kao USA


LEAGUE PARK OVERVIEW

League Park is a boutique investment bank committed to advising clients on strategies to try and maximize shareholder value. League Park counsels its clients on monetizing business value through sales and recapitalizations, enhancing corporate value through strategic acquisitions, and raising capital to fuel growth.

League Park’s senior bankers have decades of investment banking and M&A experience, completing over 300 transactions in the past 25 years. The League Park team pledges to provide sophisticated, specialized attention at every stage of the transaction process with a unique blend of financial, strategic, and operational expertise.

8


League Park offers focused strategies to help our clients

assess their strategic alternatives and realize liquidity events

Capital Raising & Recapitalizations

League Park advises clients on strategies to successfully grow,

monetize, and appropriately capitalize their businesses

Buy-Side M&A Advisory

League Park provides specialized outsourced corporate

development services, tailoring buy-side programs to the specific

needs of its acquisitive clients

BUSINESS SERVICES

CONSUMER& RETAIL

HEALTHCARE INDUSTRIAL TECHNOLOGY

INDUSTRY EXPERTISE

ADVISORY CAPABILITIES

CONTACT

For more information, please contact:

SEAN DORSEYFOUNDER & CEO

WAYNE TWARDOKUSMANAGING DIRECTOR

[email protected]

216.455.9990

[email protected]

216.455.9989


RECENT TRANSACTIONS

9

INDUSTRIAL & CHEMICALS

BUSINESS SERVICES, CONSUMER, HEALTHCARE & IT


SOURCES & DISCLOSURE

10

SOURCES REFERENCED

American Chemistry Council (ACC)

American Coatings Association

Bureau of Labor Statistics (BLS)

Capital IQ

Company Investor Presentations

Dorsey & Whitney

Federal Reserve Bank of St. Louis

Gasworld

ICIS

Organization for Economic Cooperation & Development (OECD)

US Census Bureau

DISCLOSURE

The preceding report has been prepared by League Park. This report is an overview and analysis of the industry and consolidation trends and is not intended to provide investment recommendations on any specific industry or company. It is not a research report, as such term is defined by applicable law and regulations. It is not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell any financial instruments or to participate in any particular trading strategy. In addition, this report is distributed with the understanding that the publisher and distributor are not rendering legal, accounting, financial or other advice and assume no liability in connection with its use. This report does not rate or recommend securities of individual companies, nor does it contain sufficient information upon which to make an investment decision. Any projections, estimates, or other forward looking statements contained in this report involve numerous and significant subjective assumptions and are subject to risks, contingencies, and uncertainties that are outside of our control, which could and likely will cause actual results to differ materially.

These materials are based solely on information contained in publicly available documents and certain other information provided to League Park, and League Park has not independently attempted to investigate or to verify such publicly available information, or other information provided to League Park and included herein or otherwise used. League Park has relied, without independent investigation, upon the accuracy, completeness and reasonableness of such publicly available information and other information provided to League Park. These materials are intended for your benefit and use and may not be reproduced, disseminated, quoted or referred to, in whole or in part, or used for any other purpose, without the prior written consent of League Park. Nothing herein shall constitute a recommendation or opinion to buy or sell any security of any publicly-traded entity mentioned in this document.

Securities offered through SFI Capital Group, LLC, Member FINRA, Member SIPC and the affiliated broker-dealer of League Park Advisors, LLC

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