LyondellBasell leads first-half materials deals

Materials giant LyondellBasell Industries grabbed first-half headlines in plastics materials M&A for deals still in process.

LBI got the ball rolling in February when it announced its acquisition of global compounding and concentrates leader A. Schulman Inc. for $2.25 billion. Based in Houston and London, LBI is one of the world's largest producers of olefins and polyolefins, including polypropylene and polyethylene resins. Fairlawn, Ohio-based Schulman also ranks as one of Europe's largest resin distributors.

The transaction will create an industry-leading compounding business with combined sales of $4.6 billion and adjusted EBITDA of $446 million over the last 12 months. The deal will add Schulman's $2.5 billion in annual revenue, 54 manufacturing sites and 2.4 billion pounds of production capacity to LBI's own PP compounding unit, which has $2.1 billion in annual sales, 18 manufacturing sites and 2.5 billion pounds of production capacity.

The LBI-Schulman deal has been approved by Schulman shareholders but still needs regulatory approval before being finalized.

LBI followed up in June by confirming that it's negotiating to buy a controlling stake in Brazil's Braskem SA in a deal that would create a resin powerhouse throughout the Americas.

LBI and Odebrecht SA, the majority owner of São Paulo-based Braskem, confirmed the negotiations, saying that they "have entered into exclusive discussions regarding a potential transaction between LyondellBasell and Braskem."

They added that Braskem's board of directors and management "have been informed of the existence of these discussions," adding that "the discussions are preliminary and no agreements have been reached."

Rumors of an LBI-Odebrecht deal for Braskem were first reported by the Wall Street Journal in October and were reinforced by Brazil's Valor Economico newspaper in May. The Valor Economico report said LBI had valued all of Braskem at $11.5 billion.

If a deal happens, it would combine two of the largest North American makers of polypropylene resin, and two major global polyethylene suppliers. Braskem opened a new PE and petrochemicals complex through a joint venture in Mexico in 2016 and will open a major new PP line in Texas in 2020. LBI plans to add PE and PP production in North America, including the addition of a 1.1 billion-pound-capacity HDPE unit in Texas next year.

Odebrecht, a Brazilian conglomerate, owns a 50.1 percent stake in Braskem. Petroleo Brasileiro SA, Brazil's state-owned oil firm, known as Petrobras, holds 47 percent of voting capital in Braskem.

In another major first-half materials deal, three global materials firms formed a joint venture to buy an unfinished PET resin and feedstocks plant in Corpus Christi, Texas, for $1.125 billion.

The JV has been named Corpus Christi Polymers LLC. Its three partners are Alpek SAB de CV of Mexico, Indorama Ventures Holdings LP of Thailand and Far Eastern Investment Ltd. of Taiwan.

Construction on the massive plant, which would have more than 2 billion pounds of annual PET production capacity, was stopped last year when owner M&G Group filed for bankruptcy in Italy and the U.S. In addition to $1.125 billion in cash, the deal includes "other capital contributions" from the buyers.

The plant is estimated to be 80 percent complete. When online, it is expected to be the largest single line vertically integrated PTA-PET production facility in the world and the largest PTA plant in the Americas.

Some market watchers have expressed concern that the compounding/concentrates space was "fished out" because of the number of deals made in recent years. Bill Ridenour, president of Polymer Transaction Advisors Inc. in Foxfire, N.C., said that although fewer mid-sized compounders and concentrates makers might be available, higher selling prices "are bringing more firms to market."

"There are still opportunities in the materials space," added David Evatz, managing director with Stout Risius Ross in Chicago. "And sometimes those [compounding] firms trade high vs. other sectors."

"I don't think compounding is fished out," said Thomas Blaige, chairman and CEO of Blaige & Co. in Chicago. "There's so much fragmentation there. Compared to other industries, there are lots of targets left."

Other notable first-half materials deals included:

• Compounding and distribution firm keeping its pattern of dealmaking active with two deals. Avon Lake, Ohio-based PolyOne in January acquired IQAP Masterbatch Group SL, a privately owned specialty colorants and additives maker with customers throughout Europe. Then in June, PolyOne snagged composites maker PlastiComp Inc. for an undisclosed price.

Winona, Minn.-based PlastiComp makes long-fiber technology-based composites for medical devices, robots and drones, outdoor equipment and other markets. PolyOne now has made six acquisitions since early 2017.

• Celanese Corp. of Dallas also stayed active in compounding acquisitions by purchasing Omni Plastics LLC of Evansville, Ind. Omni, founded in 1999, runs single- and twin-screw compounding lines in a facility with nearly 300,000 square feet of floor space. Omni employs about 100 in the U.S. Celanese now has made four compounding acquisitions since 2014.

• In a deal that will create a major plastics additives player, private equity firm SK Capital Partners bought SI Group and plans to combine it with its own Addivant business. New York-based SK announced the deal June 1. SI is a 112-year-old firm based in Schenectady, N.Y. Its product lines include plasticizers, flame retardants and antioxidants. SI has more than $1 billion in annual sales, employing more than 2,800 at 20 locations worldwide.

SK is buying SI from the family of W. Howard Wright, a former General Electric chemist who worked with Thomas Edison while at GE and founded the firm in 1906. SK formed Danbury, Conn.-based Addivant in 2013 after acquiring the antioxidant and light-stabilizer business of Chemtura Corp. for almost $200 million. Addivant has estimated annual sales of more than $500 million and employs more than 500 at 11 global plants.