The number of plastics materials deals fell in 2018, but financial pros said there's still a good amount of interest in that sector.
After 49 resin, color and compounding deals took place in 2017, only 43 happened in 2018, according to P&M Corporate Finance of Southfield, Mich. That's a drop of 12 percent.
The most prominent materials-related deal of the second half came when Downers Grove, Ill.-based chemicals distributor Univar Inc. agreed to pay $1.8 billion for Nexeo Soutions Inc., a plastics and chemicals distributor based in The Woodlands, Texas. But Univar officials quickly said they were likely to seek another buyer for the plastics portion of Nexeo, since their focus has been on the chemicals market, not plastics.
Also in the second half, private equity firm Arsenal Capital Partners of New York bought color concentrates maker Chroma Color of McHenry, Ill., and then combined Chroma with three other Arsenal-owned concentrates makers — Carolina Color, Breen Color Concentrates and Hudson Color — under the Chroma name. The combined firm now has six production sites in Illinois, North Carolina, Massachusetts, Ohio and New Jersey.
"There's been a lot of consolidation on the resin side, but you can still find deals in compounds and concentrates," said Phil Karig, managing director of the Mathelin Bay Associates LLC consulting firm in St. Louis. "A lot of margin can be gained there."
David Evatz, managing director with Stout Risius Ross LLC in Chicago, said that although the number of materials deals is declining, it's not from lack of interest among investors.
"Sometimes there are fewer good assets available or a lack of quality companies and sometimes it's just timing," Evatz said. "But there's definitely still interest in materials."
"There are still a lot of companies out there on the compounding and concentrates side," said Kurt Loeffler, a director with Polymer Transaction Advisors Inc. in Foxfire, N.C. "There are a lot of smaller guys in that market that might want to sell if their owners get up there in age, even if they don't get the large multiples that larger corporations get."
Other notable second-half materials deals included:
• Swiss materials supplier Clariant AG and Saudi chemical company Saudi Basic Industries Corp. merged parts of their businesses in a bid to create a leading supplier of high-performance materials. The move followed Sabic's takeover of a stake of almost 25 percent in Clariant. Under the deal, Clariant will combine its additives and high-value masterbatches — color, high-temperature resins and health care — with parts of Sabic's specialties business to create a new joint venture business for high-performance materials. The deal does not include Lexan polycarbonate or several other Sabic materials that originated with GE Plastics.
• A group of South Korean companies agreed to acquire MPM Holdings Inc., the parent company of global silicones supplier Momentive, for about $3.1 billion. The buyers — SJL Partners LLC, KCC Corp. and Wonik QnC Corp. — will assume all of Momentive's net debt, pension and other post-employment benefit liabilities, which total more than $2 billion.
• The PetroChem Wire consulting firm was acquired by Oil Price Information Service, a unit of global consulting firm IHS Markit. There will be no immediate changes to PCW's reports on prime and recycled plastic resins, olefins and natural gas liquids.
• Ravago Group made a pair of deals when it bought resin distributor Bolcof-Port Polymers of Azusa, Calif., and I. Stern & Co., a distributor and reseller of commodity resins in Clark, N.J. Ravago now has made 10 acquisitions since 2016.
• Arsenal made yet another deal when it bought specialty polymers maker Polytek Development Corp. of Easton, Pa., for an undisclosed price. That marked the 25th plastics-related deal for Arsenal since 2012. Arsenal acquired Polytek from private equity firm Morgenthaler Private Equity of Cleveland.
• Global colorant provider Chromaflo Technologies acquired the colorants unit of Central de Colores Plásticos (Cecoplas) of Querétaro, Mexico. Ashtabula, Ohio-based Chromaflo purchased the pigment dispersion business and a manufacturing facility in the deal. Chromaflo has been owned since late 2016 by private equity firm American Securities LLC of New York.
• Brightmark Energy LLC took majority ownership in RES Polyflow LLC, a plastics-to-fuel company that's planning a plant in Ashley, Ind. San Francisco-based Brightmark, a renewable energy development firm, has invested $10 million in RES Polyflow and committed another $47 million to develop the company's first plant.