The mergers and acquisitions market for plastic materials stumbled through the first half of 2009, but could rebound in the year's second half.
According to the Chicago-based investment firm Blaige & Co. LLC, the number of first-half deals completed in the sector actually increased from 36 in 2008 to 51 this year. But a number of big deals closed under less-than-ideal circumstances, including:
* Dow Chemical Co.'s $15.3 billion acquisition in April of Rohm and Haas Co. The deal involved a lawsuit from Philadelphia-based Rohm and Haas, and the awarding of $2.5 billion in preferred shares to two major Rohm and Haas shareholders in order for Midland, Mich.-based Dow to complete the buy.
* International Petroleum Investment Corp.'s April purchase of Pittsburgh-based Nova Chemicals Corp. for about $500 million, or $6 per share. Nova had been priced at $20 per share as recently as September 2008. IPIC is based in Abu Dhabi, United Arab Emirates.
* German investor Andreas Heeschen's ProChemie Holding Ltd. buying half of bankrupt polyolefins giant LyondellBasell Industries AF SCA in May for an undisclosed price.
But the most astounding low-end bargain deal had to be New York-based private equity firm SK Capital Partners LP buying the integrated nylon business of Solutia Inc. of St. Louis for $54 million in cash. The private investment firm took on all of the Solutia unit's liabilities, including employee and pension costs but buying a business with $1.8 billion in annual sales for less than $100 million raised more than a few eyebrows inside the industry.
Plastics News tracked eight other materials deals involving assets, customer lists or technology during the first half of 2009.
Fifty percent involved the compounding field, where M&A veteran Bill Ridenour said activity could rise in the last six months of the year.
There's far too much capacity in compounding, said Ridenour, president of Polymer Transaction Advisors Inc. in Newbury, Ohio. That market needs to go through a severe shakeout.
Officials at Plante & Moran Corporate Finance LLC in Southfield, Mich., also said global M&A activity in resin and color and compounding could see an uptick in the second half of 2009, after the number of first-quarter deals fell from 12 to nine.