Huntsman, Clariant merger leads first-half materials deals

One big deal involving plastic materials made headlines in the first half of 2017, but the market stayed busy with several smaller deals as well.

The headline-grabber came on May 22, when Huntsman Corp. and Clariant International Ltd. announced that they would merge as equal companies through an all-stock transaction by the end of 2017.

The new company will be named HuntsmanClariant and will have annual sales of about $13.2 billion. Peter Huntsman, currently president and CEO of Huntsman, will become CEO of the new company.

Huntsman, based in The Woodlands, Texas, is a world-scale polyurethanes, pigments, advanced materials, performance products and textile effects business. It's in the process of separating its pigments business, including titanium dioxide.

Clariant of Muttenz, Switzerland, was built up through the combination of a number of European chemicals firms. It operates in additives, catalysts, functional materials, industrial and consumer specialties, masterbatches, oil and mining services and pigments.

The two firms had been linked in merger talks for several years. Market analyst Phil Karig said the deal could work out well for both companies.

"With Huntsman just spinning off its titanium dioxide and performance additives business, this was a good time for them to find a partner that could fill some of the void and fit well with their own remaining operations," said Karig, managing director of Mathelin Bay Associates LLC in St. Louis.

The number of materials deals in the first half was down slightly from the same period in 2016, according to P&M Corporate Finance in Southfield, Mich. Based on processing sector, the number of first-half resin/color/compounding deals was 21 — one less than the first half of 2017.

Based on product segment, the number of first-half resin deals declined from 23 in 2016 to 20 this year.

In spite of that trend, some firms were involved in multiple materials deals in the first half. Materials maker PolyOne Corp. completed three deals in the first half, while resin distributor Nexeo Solutions wrapped up a pair.

Avon Lake, Ohio-based PolyOne — North America's largest compounder and concentrates maker and one of its largest resin distributors — in January bought a pair of specialty colorants and additives makers.

Silcotec Inc. of La Porte, Ind., makes silicone-based color masterbatch concentrates. Comptek Kunststoffverarbeitung GmbH of Diez, Germany, produces color compounds and concentrates based on fluoropolymers and other high-end specialty resins. Silcotec and Comptek combined have annual sales of between $10 million and $12 million.

PolyOne followed those deals in June by purchasing Pineville, N.C.-based Rutland Holding Co. The firm makes plastisol compounds, specialty color products and screen printing inks. Its plastisols are mostly sold into automotive applications, while its inks are focused on the apparel market.

The three deals that PolyOne has made so far in 2017 match the firm's total for all of 2016. PolyOne posted sales of just over $3.3 billion in 2016.

In addition to the three acquisitions, PolyOne also has a deal pending to sell its Designer Structures & Solutions unit to Arsenal Capital Partners for $115 million. That deal is scheduled to close in the third quarter.

Both deals made by Nexeo — a leading resin distributor based in The Woodlands — were international. In February, Nexeo bought acquired part of the DSM NV business of German resin distributor K.D. Feddersen Norden AB. That deal included resin inventory and accounts of customers who had been buying materials made by DSM — a Dutch materials supplier — from Feddersen in parts of northern Europe.

Then in March, Nexeo acquired Mexican distribution firm Ultra Chem S de RL de CV. Plastics-related products distributed by Mexico City-based Ultra Chem include polycarbonate, ABS and SAN resins, as well as plastic additives such as PVC stabilizers, antioxidants and foaming agents.

The 17-year-old firm also distributes polyurethanes for flexible foam products, as well as a range of specialty chemicals. Ultra Chem's line card includes 20 suppliers, including such global firms as Dow Chemical Co., BASF SE, DSM NV and Lubrizol Corp.

Nexeo distributes resins, compounds and concentrates for more than 20 suppliers, including ExxonMobil Chemical and LyondellBasell Industries. Plastics accounted for almost 52 percent of Nexeo's total sales in the fourth quarter of 2016.

Another notable first half materials deal may have given market watchers a sense of déjà vu. In that deal, private equity firm Wind Point Partners added to its PVC compounding base by acquiring Reinier Plastics of Marieville, Quebec.

Chicago-based Wind Point made the deal through Aurora Plastics LLC, a Streetsboro, Ohio-based PVC compounder that it had purchased in August. A combined Aurora/Reinier will offer a wider range of custom PVC compounding capabilities, including rigid PVC powders and pellets.

Wind Point — which also owns Novolex, the Hartsville, S.C.-based firm that ranks as one of North America's largest producers of plastic film and bags — previously owned compounding firm Citadel Plastics. Wind Point created Citadel through a series of materials deals before selling it in 2012 to Huntsman Gay Global Capital, which later sold the business to A. Schulman Inc.

"It looks like Wind Point might be trying the same thing with Aurora that it did with Citadel," said Bill Ridenour, president of Polymer Transactions Inc. in Foxfire, N.C.