CHEMICALS AND SPECIALTY MATERIALS
INDUSTRY UPDATE │ SEPTEMBER 2015
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CHEMICALS AND SPECIALTY MATERIALS
INDUSTRY UPDATE │ SEPTEMBER 2015
CHEMICALS AND SPECIALTY MATERIALS INDUSTRY UPDATE
CONTENTS
INTRODUCTION
Harris Williams & Co. is pleased to present its chemicals and specialty materials
industry update for September 2015. This report provides commentary and analysis
on current market trends and merger and acquisition dynamics within the global
chemicals and specialty materials industry.
Over the past quarter, M&A activity in the chemicals and specialty materials
market remained steady, with both strategic and financial buyers continuing to be
active in the market. Conditions remain supportive across capital markets, and
we expect the pace of M&A activity to remain strong for the balance of 2015.
We hope you find this edition helpful and encourage you to contact us directly if
you would like to discuss our perspective on current industry trends or our relevant
industry experience.




WHAT WE’RE READING
PUBLIC COMPARABLES
PUBLIC MARKETS
SELECT M&A ACTIVITY
CONTACTS
Patrick McNulty
Managing Director
pmcnulty@harriswilliams.com
+1 (804) 932-1339
OUR PRACTICE
Harris Williams & Co. is a leading advisor to the chemicals and specialty materials
industry. Our significant experience covers a broad range of business models,
market segments, and applications.
Business Types
End Markets
 Manufacturers
 Distributors
 Outsourced Solutions
 Other Service Providers
 Aerospace
 Agricultural
 Automotive
 Consumer
 Industrial
 Life Sciences
 Oil & Gas
 Other
Applications
 Adhesives, Sealants, &
Elastomers
 Aerosols
 Cleaning & Preparation
 Films
 Paints & Coatings
 Water Treatment
 Other
Darwin Olympia
Director
dolympia@harriswilliams.com
+1 (804) 915-0141
Brad Morrison
Vice President
bmorrison@harriswilliams.com
+1 (804) 915-0168
John Lautemann
Vice President
jlautemann@harriswilliams.com
+1 (804) 887-6081
HARRIS WILLIAMS & CO. DEAL SPOTLIGHT
AR Metallizing
a portfolio company of
Harris Williams & Co. advised AR Metallizing, a portfolio
company of H.I.G. Capital, on its sale to Nissha Printing
Company. AR Metallizing is the leading global provider of
specialty coatings for metallized applications.
has been acquired by
Q Holding Company
a portfolio company of
has been acquired by
The firm also advised Q Holding Company (Q), a portfolio
company of Industrial Growth Partners, on its sale to 3i
Group. Q is a leading global manufacturer of highlyengineered, precision-molded elastomeric components.
www.harriswilliams.com
PAGE | 1
CHEMICALS AND SPECIALTY MATERIALS
INDUSTRY UPDATE │ SEPTEMBER 2015
WHAT WE’RE READING
AIR PRODUCTS TO SPIN OFF MATERIALS TECHNOLOGIES
IHS Chemical Week
9/28/2015
Air Products plans to spin off its electronics and performance materials segment to shareholders, the latest in a series
of tax-free spin-offs announced by chemical makers. The materials technologies segment, which accounts for
roughly 20% of Air Products’ revenue, had sales of $2.2 billion in the 12 months ended June 30th and adjusted EBITDA
of $584 million. The targeted completion is before September 2016.
Read the full article here.
KRATON TO ACQUIRE ARIZONA CHEMICAL FOR $1.37B
Houston Business Journal
9/28/2015
Houston-based specialty chemical company Kraton Performance Polymers plans to acquire Jacksonville, Floridabased Arizona Chemical Holdings for $1.37 billion. Arizona Chemical’s and Kraton’s businesses are particularly
complementary in markets such as adhesives, roads and construction, coatings, and oilfield chemicals.
Kraton President and CEO, Kevin Fogarty, said in a statement he expects synergies of $65 million by 2018 and free
cash flow of more than $450 million over the first three years of combined operations.
Read the full article here.
ASHLAND PLANS TO SEPARATE SPECIALTY CHEMICALS, VALVOLINE UNITS
Wall Street Journal
9/22/2015
Ashland announced yesterday it has approved a plan to split into two independent public companies, separating its
engine and automotive maintenance business from its specialty chemicals business. The former will be named
Valvoline, while the latter will retain the name Ashland. CEO Williams Wulfsohn commented that the split comes at
the end of a ten-year restructuring plan which has seen Ashland streamline its operations through acquisitions and
divestitures, transforming the firm from an oil refiner to a specialty chemicals company.
Read the full article here.
SCHWEITZER-MAUDUIT TO ACQUIRE ARGOTEC IN $280M DEAL
Street Insider
9/21/2015
Schweitzer-Mauduit announced the signing of a definitive agreement to acquire Argotec LLC, a leading producer
of highly engineered urethane films for demanding specialty applications in surface protection, glass lamination and
medical products.
Frederic Villoutreix, Chief Executive Officer of SWM, commented that Argotec’s films “generate strong margins and
are used in a diverse set of attractive niche market segments, such as paint protection, glass lamination, medical
and graphics. This acquisition offers solid growth prospects and further diversification for SWM.“
Read the full article here.
CHINESE MATERIALS FIRMS MAY NEED M&A TO SUSTAIN GROWTH
Plastics News
9/11/2015
With organic growth prospects becoming more limited, mergers & acquisitions may be what Chinese firms need to
maintain momentum in the coming months and quarters. Growth for China's chemicals companies has historically
been focused around organic opportunities — companies invested in their own businesses, mostly by expanding
production capacity, which has led to substantial overcapacity.
In contrast to organic growth, M&A will not create additional capacity. Instead, existing capacity could be
consolidated to achieve economies of scale and improve profit margins.
Read the full article here.
PAGE | 2
CHEMICALS AND SPECIALTY MATERIALS
INDUSTRY UPDATE │ SEPTEMBER 2015
PUBLIC COMPARABLES
As of September 30, 2015 ($ in millions, except per share amounts)
Stock Performance
Diversified
BASF SE
Current
% of
Price
LTM High
3-Year
Free Cash
Revenue
Mkt Cap
TEV
CAGR
2015E
Revenue
EBITDA
Price / Earnings
Margin
2015E
2016P
TEV / EBITDA
LTM
2015E
2016P
Flow
Net Debt/
Conversion1
EBITDA
$75.31
68.7%
$68,638
$86,388
(2.3%)
$84,843
$12,256
14.4%
12.6x
11.3x
7.4x
7.1x
6.7x
41.8%
1.4x
E. I . du Pont de Nemours and Company
48.58
60.2%
43,749
51,483
1.5%
28,353
5,887
20.8%
15.3x
13.6x
9.0x
8.7x
8.9x
62.1%
1.3x
The Dow Chemical Company
43.58
81.0%
49,791
68,695
(1.0%)
50,656
9,190
18.1%
13.5x
12.1x
7.3x
7.5x
7.2x
52.9%
1.5x
Eastman Chemical Co.
65.60
73.8%
9,738
16,882
9.8%
10,142
2,315
22.8%
8.9x
8.4x
7.6x
7.3x
7.0x
72.7%
3.1x
Celanese Corporation
60.32
81.3%
9,213
11,283
0.8%
5,892
1,509
25.6%
10.2x
9.9x
9.5x
7.5x
7.3x
26.7%
1.1x
11.8x
11.7x
8.4x
7.7x
69.3%
2.3x
Ashland I nc.
101.51
76.7%
6,858
9,443
0.2%
5,402
1,124
20.8%
14.2x
FMC Corp.
34.21
52.9%
4,526
6,406
10.7%
3,645
771
21.1%
11.1x
8.8x
7.9x
8.3x
7.0x
76.7%
2.4x
Albemarle Corporation
45.40
69.9%
5,068
8,988
(3.9%)
3,696
954
25.8%
11.9x
10.9x
14.5x
9.4x
8.9x
70.0%
4.0x
Clariant AG
17.04
76.1%
5,451
6,935
1.1%
5,989
872
14.6%
15.1x
12.9x
7.9x
8.0x
7.4x
58.5%
1.7x
Median
73.8%
0.8%
20.8%
12.6x
11.3x
7.9x
8.0x
7.3x
62.1%
1.7x
Mean
71.2%
1.9%
20.5%
12.5x
11.1x
9.2x
8.0x
7.6x
59.0%
2.1x
Coatings
PPG I ndustries, I nc.
$90.99
The Sherw in-Williams Company
76.5%
$24,400
$27,813
5.1%
$15,601
$2,674
17.1%
15.8x
13.9x
11.0x
10.4x
9.6x
78.8%
1.2x
234.53
79.7%
21,617
23,828
8.3%
11,533
1,755
15.2%
21.3x
18.1x
15.1x
13.6x
11.9x
86.0%
1.3x
Akzo Nobel N.V.
64.60
75.9%
15,995
18,990
(3.1%)
16,862
2,362
14.0%
14.2x
13.3x
8.8x
8.0x
7.6x
69.3%
1.0x
The Valspar Corporation
73.45
80.8%
5,841
7,837
4.3%
4,414
729
16.5%
15.8x
13.8x
10.9x
10.8x
9.9x
85.2%
2.7x
RPM I nternational I nc.
42.69
82.1%
5,650
7,392
8.7%
4,761
654
13.7%
16.7x
15.2x
12.5x
11.3x
10.2x
85.5%
2.7x
Median
79.7%
5.1%
15.2%
15.8x
13.9x
11.0x
10.8x
9.9x
85.2%
1.3x
Mean
79.0%
4.7%
15.3%
16.8x
14.9x
11.7x
10.8x
9.9x
80.9%
1.8x
Chemical Distribution & Services
Brenntag AG
$54.49
81.4%
$8,353
$10,119
2.4%
$12,252
$954
7.8%
17.3x
16.0x
11.5x
10.6x
10.0x
87.2%
1.8x
I MCD N.V.
34.33
81.9%
1,806
2,294
13.8%
1,771
155
8.8%
17.3x
14.8x
16.5x
14.8x
12.7x
96.8%
3.1x
Quaker Chemical Corporation
77.07
80.5%
1,021
1,025
3.8%
759
101
13.3%
17.7x
16.1x
10.7x
10.1x
9.5x
87.7%
NM
Aceto Corp.
28.13
88.6%
807
880
6.7%
567
N/A
N/A
20.6x
17.9x
13.1x
11.7x
10.9x
99.1%
N/A
Median
81.6%
5.3%
17.2%
17.5x
16.1x
12.3x
11.1x
10.5x
92.2%
2.4x
Mean
83.1%
6.7%
10.0%
18.2x
16.2x
12.9x
11.8x
10.8x
92.7%
2.4x
Agricultural
Monsanto Company
$86.13
68.4%
$40,131
$48,035
9.7%
$15,638
$4,868
31.1%
14.8x
13.6x
10.3x
9.9x
9.3x
78.3%
1.6x
Syngenta AG
324.66
72.3%
29,748
33,094
4.4%
14,098
2,860
20.3%
17.7x
15.8x
12.3x
11.6x
10.6x
81.2%
1.2x
Potash Corporation of Saskatchew an I nc.
19.98
56.1%
16,460
20,002
(7.7%)
6,269
2,948
47.0%
11.0x
10.1x
7.3x
6.8x
6.4x
55.5%
1.3x
The Mosaic Company
29.94
55.6%
10,680
12,331
(3.0%)
9,423
2,288
24.3%
9.5x
8.9x
5.1x
5.4x
5.1x
62.7%
0.7x
Agrium I nc.
88.36
79.7%
12,587
16,772
1.7%
15,771
2,189
13.9%
12.3x
10.7x
10.4x
7.7x
7.0x
(7.7%)
2.0x
5.59
35.9%
410
456
324
76
23.6%
NM
87.5x
4.7x
5.8x
4.4x
63.6%
0.6x
I ntrepid Potash, I nc.
(3.4%)
Median
62.2%
(0.6%)
23.9%
12.3x
12.2x
8.8x
7.2x
6.7x
63.1%
1.2x
Mean
61.3%
0.3%
26.7%
13.0x
24.4x
8.3x
7.9x
7.1x
55.6%
1.2x
1.9x
Specialty Materials
Compagnie de Saint-Gobain S.A.
Ev onik I ndustries AG
Solv ay SA
$43.57
86.2%
$24,826
$34,296
(3.1%)
$46,244
$4,602
10.0%
16.1x
13.4x
7.4x
7.5x
6.7x
64.2%
33.71
79.2%
15,567
15,096
(6.2%)
15,606
2,768
17.7%
12.6x
12.5x
6.4x
5.5x
5.4x
51.6%
NM
103.49
65.1%
8,588
10,707
8.1%
12,009
2,173
18.1%
12.3x
10.5x
7.3x
4.9x
4.3x
24.2%
0.8x
Av ery Dennison Corporation
58.94
90.9%
5,317
6,205
2.9%
6,005
715
11.9%
17.4x
15.5x
9.0x
8.7x
8.2x
80.2%
1.2x
PolyOne Corporation
29.72
72.1%
2,613
3,435
12.5%
3,460
432
12.5%
14.7x
12.7x
10.0x
7.9x
7.2x
72.7%
1.9x
Rogers Corporation
49.69
58.5%
962
938
3.8%
671
N/A
16.5x
13.2x
7.0x
7.2x
6.1x
74.8%
N/A
N/A
Median
75.7%
3.3%
12.5%
15.4x
12.9x
7.3x
7.3x
6.4x
68.4%
1.6x
Mean
75.3%
3.0%
14.0%
14.9x
13.0x
7.9x
6.9x
6.3x
61.3%
1.5x
Overall Median
76.3%
2.6%
17.4%
14.8x
13.3x
9.2x
8.2x
7.5x
71.3%
1.6x
Overall Mean
72.9%
2.9%
19.4%
14.6x
15.4x
9.7x
8.7x
8.0x
66.9%
1.8x
1)
Free cash flow conversion defined as EBITDA less capital expenditures divided by EBITDA.
PAGE | 3
CHEMICALS AND SPECIALTY MATERIALS
INDUSTRY UPDATE │ SEPTEMBER 2015
PUBLIC MARKETS OVERVIEW
3-YEAR REVENUE CAGR (2011 – 2014)
Diversified
6.7%
Agricultural
AVERAGE EBITDA MARGIN (2015E)
20.5%
15.3%
92.7%
26.7%
61.3%
Spe cialty Materials
TOTAL ENTERPRISE VALUE / 2015E EBITDA
NET DEBT / 2015E EBITDA
8.0x
2.1x
Diversifie d
10.8x
Coatings
55.6%
Agricultural
14.0%
11.8x
Che mical Distribution & Servic es
1.8x
Coatings
2.4x
Che mical Distribution & Servic es
7.9x
Agricultural
80.9%
Coatings
Che mical Distribution & Servic es
Agricultural
Diversifie d
59.0%
Diversified
10.0%
1.2x
Agricultural
6.9x
Specialty Materials
12.3%
FREE CASH FLOW CONVERSION (2015E)
Diversified
Spe cialty Materials
(7.4%)
Spe cialty Materials
3.0%
Coatings
9.0%
Chemical Distribution & Services
0.3%
Che mical Distribution & Servic es
9.8%
Coatings
4.7%
Coatings
Spe cialty Materials
8.5%
Diversified
1.9%
Chemical Distribution & Services
Agricultural
3-YEAR EBITDA CAGR (2011 – 2014)
1.5x
Spe cialty Materials
PUBLIC COMPARABLES (MEDIAN TEV / LTM EBITDA)
Median
Current 3-Year 5-Year
16x
7.9x
8.9x
8.6x
Coatings
11.0x
11.9x
10.9x
Chemical Distribution & Services
Diversified
14x
12.3x
10.6x
9.7x
Agricultural
8.8x
10.4x
10.5x
Specialty Materials
7.3x
8.2x
7.7x
Total
8.8x
10.4x
9.7x
12x
10x
8x
6x
4x
Sep-10
Sep-11
Diversified
Coatings
Sep-12
Sep-13
Chemical Distribution & Services
Sep-14
Agricult ural
Sep-15
Specialty Materials
PAGE | 4
CHEMICALS AND SPECIALTY MATERIALS
INDUSTRY UPDATE │ SEPTEMBER 2015
M&A TRANSACTIONS
Closed Date
10/2/2015
Target
Target Business Description
Escudero Chemicals LLC Escudero Chemicals, LLC prov ides production chemicals and serv ices.
Acquirer
WadeCo Specialties I nc.
9/28/2015
Arizona Chemical
(Announced) Company, LLC
Arizona Chemical Company, LLC operates as a producer and biorefiner
of pine chemicals.
Kraton Polymers LLC
9/21/2015
Argotec LLC
(Announced)
Argotec LLC manufactures and supplies custom engineered
polyurethane films and sheets for v arious critical applications.
Schw eitzer-Mauduit
I nternational I nc.
9/21/2015
Pinov a Holdings, I nc.
(Announced)
Pinov a Holdings, I nc. manufactures specialty chemicals from natural
and renew able feed stocks.
Symrise AG
9/1/2015
I VC I ndustrial Coatings,
I nc.
I VC I ndustrial Coatings, I nc. manufactures and distributes pow der,
liquid, and specialty coating products for commercial and consumer
applications w orldw ide.
PPG I ndustries, I nc.
8/24/2015
Quest Construction
Products, LLC
Quest Construction Products, LLC manufactures protectiv e systems and
coatings for the construction industry.
Building Materials
Corporation of America,
I nc.
7/31/2015
AVI NTI V I nc.
(Announced)
7/31/2015
Plz Aeroscience Corp.
7/29/2015
Cytec I ndustries I nc.
(Announced)
7/1/2015
6/26/2015
Cuming Microw av e
Corporation
Zep, I nc.
AVI NTI V I nc. dev elops, produces, and markets engineered materials for Berry Plastics Group, I nc.
consumer and industrial markets.
Plz Aeroscience Corp. manufactures specialty aerosol products.
Pritzker Group Priv ate
Capital
Cytec I ndustries I nc., a specialty materials and chemicals company,
focuses on dev eloping, manufacturing, and selling v alue-added
products for aerospace and industrial materials, mining, and plastics
industries.
Cuming Microw av e Corporation manufactures and supplies
Solv ay SA
microw av e absorbers, RF and radar absorbers, dielectric materials,
artificial dielectrics, radomes and anechoic chambers, and EMC
chambers
for the aerospace
and
defense,
electronics,
telecom,
Zep I nc. produces
and markets
cleaning
and
maintenance
chemicals,
PPG I ndustries, I nc.
New Mountain Capital, LLC
along w ith related products and serv ices for the commercial, industrial,
and institutional markets in North America and Europe.
6/24/2015
The M. F. Cachat
Company
The M. F. Cachat Company is engaged in the marketing and distribution
of specialty chemical products.
I MCD Group B.V.
6/19/2015
Royal Adhesiv es &
Sealants, LLC
Royal Adhesiv es & Sealants, LLC manufactures and markets adhesiv es,
sealants, encapsulants, and polymer coatings.
American Securities;
American Securities
Partners VI , L.P.
6/1/2015
Quest Automotiv e
Products and Quest
I ndustrial Products
As of June 1, 2015, Quest Automotiv e Products and Quest I ndustrial
Products w ere acquired by The Valspar Corporation.
The Valspar Corporation
4/15/2015
Protectiv e I ndustries,
I nc.
Protectiv e I ndustries, I nc., doing business as Caplugs, manufactures and Berw ind Corporation
distributes product protection solutions.
2/10/2015
U.S. Water Serv ices, I nc. U.S. Water Serv ices, I nc. prov ides chemicals and equipment for w ater
management and treatment to industrial customers in North America.
ALLETE, I nc.
2/5/2015
Charter NEX Films I nc.
Pamplona Capital
Management
Charter NEX Films I nc. engages in engineering, extruding, and
manufacturing monolayer, coextruded, and barrier blow n films for
packaging applications.
PAGE | 5
CHEMICALS AND SPECIALTY MATERIALS
INDUSTRY UPDATE │ SEPTEMBER 2015
OUR FIRM
Harris Williams & Co. has a broad range of industry expertise, which creates powerful opportunities.
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PAGE | 6
CHEMICALS AND SPECIALTY MATERIALS
INDUSTRY UPDATE | SEPTEMBER 2015
HARRIS WILLIAMS & CO.
SOURCES
Capital IQ
Houston Business Journal
IHS Chemical Week
Plastics News
Street Insider
The Wall Street Journal
DISCLOSURES
Harris Williams & Co. (www.harriswilliams.com) is a preeminent middle market investment bank focused on the advisory needs of clients worldwide.
The firm has deep industry knowledge, global transaction expertise, and an unwavering commitment to excellence. Harris Williams & Co. provides
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