Detroit, Michigan – Although numerous resin, compounding and distribution deals were reported, financial pros said many more could have taken place if more businesses were up for sale.
“Compounding has become pretty consolidated in North America,” said John Hart, managing director with P&M Corporate Finance in Southfield, Michigan. “But there’s no lack of interest in those companies.”
“There are more buyers than sellers in both materials and injection moulding,” added Andrew Petryk, managing director of Brown Gibbons Lang in Cleveland. “There’s more capital than opportunities, and that scarcity is driving values.”
The blockbuster December announcement of the merger of plastics and chemicals giants Dow Chemical Co. and DuPont Co. stole the second half spotlight. Both firms had been under attack from activist investors in recent years because of what was perceived as financial underperformance.
The combined firm then will be split into three separate companies, including a materials firm with annual sales of around $50 billion. That unit will be a world leader in polyethylene and will make a host of engineering and specialty resins as well.
“We’re at that later part of the [economic] cycle where you see bigger public mergers,” said Ben Whiting, plastics team director with KeyBanc Capital Markets in Cleveland. “The general trend is to be more focused, with less segments.”
Plastics financial veteran Terry Minnick — owner of Molding Business Systems in Florence, Massachusetts, worked for Dow early in his career. He said that although the Dow-DuPont merger “makes perfect sense,” it’s also the result of a changing business environment. “Nobody has patience anymore,” Minnick added. “They want a specific approach, not broad-based.”
In another multi-billion-dollar materials deal, chemicals giant Solvay SA of Brussels, Belgium, recently bought US composite materials firm Cytec Industries Inc. for $5.5 billion. Composite materials represent two-thirds of Cytec’s $2 billion in annual sales.
Cytec’s primary market is in aerospace composites, but the companies expect to work on new applications for lightweight automotive composites, thanks to Solvay’s strong position with automotive OEMs and Tier 1 suppliers.
Cytec also makes polymer additives, with a specialty in UV stabilizers. The Woodland Park, N.J., company has 4,600 employees across the globe and generated 2014 sales of $2 billion with more than half of that amount in North America.
Solvay paid $75.25 per share in cash for the business — a premium of almost 30 percent over Cytec’s per-share price on July 28, the day before the deal was announced.
Other notable second-half plastics materials deals included:
• Global compounder RTP Co. acquiring Polymer Partners LLC, a specialist in black compounds and masterbatches in Henderson, Ky.
Polymer Partners will provide RTP with additional thermoplastic compounding capacity as well as a stronger geographic presence in the eastern US, officials with Winona, Minnesota.-based RTP said.
RTP surprised many in the materials industry in December 2014 when it bought most of the assets of toll compounder Alloy Polymers of Richmond, Virginia. Alloy’s commodity resins business model was quite different than RTP’s traditional focus on engineering resins. RTP officials recently said the firm is looking for more acquisitions.
• Resin distributor M. Holland Co. making its second expansion deal of 2015, acquiring distribution firm Polymer Z LLC for an undisclosed price.
Polymer Z is a specialty resin distributor based in Birmingham, Mich. The firm was founded in 2003 and is focused on the automotive industry. Northbrook, Illinois-based M. Holland will combine Polymer Z with its existing auto business to form M. Holland Automotive Group.
• North American compounding leader PolyOne Corp. — a frequent M&A buyer — purchasing the Magenta Master Fibers business of BASF SE for $22 million.
Magenta makes speciality colour concentrates for the global fibre industry at plants in Milan, Italy; and Shanghai. The business has annual sales of $16 million, with 65 percent of that total coming from outside of North America. The sale price represents a multiple of 6.8 times Magenta’s EBITDA.
Magenta now will be part of PolyOne’s Global Color, Additives & Inks unit. The Magenta acquisition is PolyOne’s first deal since acquiring some of the assets of liquid polymer formulator Accella Performance Materials for $49 million in late 2014.