DATE : 2017-06-09
As Arkema prepares to unveil new targets and discuss long-term strategy in a July 10 Capital Market Day, the company’s CEO says that the group’s future development and transformation is more about evolution than revolution.
The French group, founded in 2004 when it was split from parent Total, has changed in the intervening years into one focused on service-oriented advanced materials with less exposure to cyclical commodities.
The company periodically sets financial, geographic and divisional targets (currently for 2017 and 2020), which will be updated at the investor day. According to CEO and chairman Thierry le Henaff: “The idea for the Capital Market Day is to go beyond 2020. It’s an opportunity to discuss where we want to take the company. It’s very important externally and internally to give the long-term direction.”
Future strategic development will evolve from current foundations rather than move in totally new directions: “Arkema is a supplier of advanced materials – we don’t want to invent a business model outside of our core - we have enough on our plate. With our positioning we can partner with innovative companies and bring to them all our knowledge and creativity in materials.”
Arkema is on track to meet one major target for 2020: to rebalance the company’s geographical exposure from heavily Europe-focused to one third of sales in each main region. In 2016, the split was around 36% in Europe, 34% in North America and, for the first time, Asia and rest of world (ROW) reached 30%.
SEGMENTS FOR GROWTH
Another key target in the transformation from commodities to specialties is to boost the high performance materials (HPM) division to 50% of sales. The group is also close to meeting this target as at the end of 2016 HPM accounted for 46% of sales. This was before the acquisition in December 2016 of €350m sales sealants specialist Den Braven, which will add a few more percentage points to the HPM portfolio this year.
HPM comprises specialty adhesives (including Bostik, the €1.5bn sales February 2015 acquisition which was the company’s largest to date), technical polymers and performance additives.
According to Le Henaff, a top priority for future growth will be adhesives and sealants, which is a very fragmented market.
The second area – here the majority will be organic growth but with acquisitions if there are opportunities – is the engineering plastics area of advanced materials. These are engineering plastics and materials that follow megatrends such as sustainable energy, water filtration, lightweight materials in automotive as well as windmills, aeronautics, consumer electronics, sports shoe design and performance.
These are all in the universe of advanced materials based on polyamides such as Rilsan (PA11), polyamide 12, Pebax, Kynar and poly-ether-ketone-ketone (PEKK).
Arkema has a commodity upstream acrylic acid (AA) business which now comprises less than 10% of company sales. To balance its cyclicality the CEO wants to continue to grow the acrylic downstream segment which comprises coatings resins and additives. These are acrylic resins for the coatings industry, Coatex products (biologic products), and high value rheological additives.
“We want to grow acrylic downstream for two reasons: we have strong know-how in terms of applications in the paints sector, adhesives etc. Secondly, acrylic downstream is more focused on innovation, is close to the end consumer, and is less capital-intensive. It is not subject to the cycle that affects more capital-intensive businesses like AA.”
He points out that downstream plants are smaller and cost far less to build. Innovation and new applications are more important than running a plant at 95% operating rate.
Another area of focus for investment Le Henaff picks out is thiochemicals (sulphur-based chemicals), which serve refining, petrochemicals and animal nutrition. When Arkema was created its presence was mostly in France. Then it added a plant in Beaumont, Texas, US, and then in 2015 started up a €200m project at Kerteh, Malaysia giving it a base in the high growth Asia region.
Molecular sieves are the fifth catalyst for growth identified by Arkema. The company is the world’s second-largest producer of the products, which are used for their adsorption and dehydration properties. End users include industrial gases, petrochemicals, medical oxygen, construction and pharmaceutical packaging. In April it started up a new plant in France.
Le Henaff says: “It does not mean the other segments will not grow but you cannot put your cash on everything – you need a balance between your growing segments and your “cash cows”. We don’t want to get rid of capital-intensive segments – it’s just a matter of balance.”
He agrees that AA is more commoditised and cyclical but claims it is still a niche which is quite specialised. As a percentage of the whole Arkema the more capital-intensive businesses will continue to decline. When Arkema began capital expenditure was 7.5% of total revenues and now it has declined to between 5.5-6%.
“This reflects the evolution of the portfolio with the arrival of adhesives which are less capital-intensive and the decline of AA as a percentage of our portfolio.”
In 2012 Arkema sold its polyvinyl chloride (PVC) and chlorine business to Klesch Group which formed KEM ONE.
MEGATREND DRIVERS
Le Henaff picks out several long-term trends which underpin Arkema’s growth strategy. The first is sustainability in terms of raw materials as well as recyclability. Secondly, energy savings and light-weighting. Third – performance, design and digitisation in an age of rapid change. Increased mobility and access to potable water are also important. Finally, he highlights demographic changes in the global population – aging and rising standard of living in developing countries as well as the rising global population.
The market for electric vehicles is growing faster than anticipated and this segment opens up opportunities for new players. “When you are not a leader in automotive and you want to bring something different with mobility and electricity it opens the field to players who were not traditionally so strong,” he says.
Arkema’s fluoropolymers and lightweight polyamides serve the electric vehicle market well, according to Le Henaff.
ACRYLIC ACID UPDATE
The global acrylic acid market has been under pressure for at least the past 2-3 years with supply exceeding demand and profitability suffering as a result.
“Our theory was that it would come back gradually starting at the end of last year; in fact this is what has happened. Last year we started to see some improvement coming from Asia and now we see that the US and Europe start to be a bit better.”
In Arkema’s analysis in 2017 AA should be a little below mid-cycle, demonstrating a gradual recovery from 2015 and 2016. “Sometimes you have to patient in acrylics.”
He points out that there have not been any new expansion announcements for AA for many years, helping the market balance.
“We would not consider disposing of AA as it is the backbone of the acrylic downstream. Compared to many chemical companies we have a lower ratio between more downstream, lower capital-intensity businesses and higher intensity.” Le Henaff insists the return on capital employed (ROCE) of Arkema’s acrylics value chain is: “quite good over the cycle and comparable to the other segments. In terms of return to shareholders acrylics has been a good bet.”
He adds: “Our idea is … to build something from where we were towards our specialties and not to remove everything that has a higher capital intensity.”
OIL IMPACT AND OUTLOOK
According to the CEO, Arkema has been profitable in both high and low oil price environments. However, he prefers a low oil price because it is better for worldwide GDP as well as for Arkema’s level of working capital.
“We had good growth in the first quarter of 2017. My feeling is that Europe and the US are “stable plus” and Asia, especially China and southeast Asia are doing well. It’s been an OK start to the year in terms of worldwide GDP.”
As Arkema puts a lot of money into research and development, the CEO is clear that the company is keen to push a lot of new products to its current customer base as well as to new customers. Then there is geographical expansion beyond the 45 countries in which it already has a significant presence.
Arkema is pursuing a service-based, high value materials growth strategy. But at the end of the day Le Henaff concedes that as a chemical company its expansion is linked to GDP.
“When we look business line by business line we think more about business development by application and not so much about GDP. But it’s clear that if I look at the history of Arkema we have never b een far from GDP: this year we started higher than GDP and at the end the idea is to beat GDP a little bit and to add to that some bolt-on acquisitions.”
2017 AND 2020 TARGETS
■ 2017 - €1.3bn in EBITDA – on track
■ 2017 - €700m sales to be divested – below target as of May but expects to meet equivalent internal enterprise value divestment target
■ 2020 - €10bn revenue – on track
■ 2020 – 17% EBITDA margin – on track
■ 2020 – less than 40% debt-to-equity ratio – on track
■ 2020 – balanced split between three global regions – on track
■ 2020 - High Performance Materials (HPM) division = 50% of sales – on track
NEW PROJECTS UPDATE
■ Molecular Sieves – €60m investment for plant at Honfleur in France. Official start-up 24 April 2017. Doubles capacity for sieves for aromatics separation, especially xylenes. HPM segment
■ Kynar fluoropolymers – Changshu, Shanghai, China, start-up April 2017. 25% global capacity increase. HPM segment
■ Polyamides Asia – Zhangjiagang site (Jiangsu Province) – bio-sourced polyamides – two compounding lines for polyamide 11 due on stream in 2017
■ Acrylic acid – $90m to replace two 45,000 tonnes/year reactors in Clear Lake, Texas, with a single 90,000 tonne/year facility reactor. Onstream target mid-2019. Total Clear Lake AA capacity 270,000 tonnes/year
■ Poly-ether-ketone-ketone (PEKK) – February 2017
confirmed doubling of capacity in France and that Alabama, US, will be location of world scale plant with start-up second half 2018
■ China – acrylic acid – in 2016 increased ownership of Taixing Sunke Chemicals (Sunke) JV with Jurong Chemical from one third to half of the plant adding 80,000 tonnes/year of capacity to total 240,000 tonnes/year from that site.
Source Icis News
DATE : 2017-06-07
Evonik has resumed production at its methyl methacrylate (MMA) plant in Worms, Germany following a technical problem last week, a source from the German company confirmed on Wednesday.
“Evonik methacrylates production in Worms has resumed full production rate after announced technical problems last week [on] Tuesday [30 May],” the source said.
“Due to the low inventories and the upcoming annual turnaround of the Wesseling site, sales control for non-contracted customers remains in place until further notice.”
The company has two MMA facilities in Germany, a 225,000 tonne/year plant in Worms and a 95,000 tonne/year facility in Wesseling.
The global MMA market is short, with demand at a strong level in Europe.
MMA is used in the manufacture of acrylic sheet, surface coatings, emulsion polymers and adhesives.
Source Icis News
DATE : 2017-05-25
Dow Chemical lifted the last of its US acrylates order controls on Thursday, but extended other monomer sales limits “until further notice”.
In a letter to customers, Dow announced it is lifting sales limits on its butyl acrylate (butyl-A) and 2-ethylhexyl acrylate (2-EHA) and vinyl acetate monomer (VAM).
The letter, however, extended order controls on Dow’s methyl methacrylate (MMA), butyl methacrylate (BMA) and glacial methacrylic acid (GMAA).
In the 25 May letter, Dow also removed the 10-day lead-time requirement for all of its performance monomers, but asked customers to provide “as much lead time as possible”, citing heightened demand for the products via tank trucks.
One month ago, the company lifted sales controls on its glacial acrylic acid (GAA), ethyl acrylate (ethyl-A), methyl acrylate (methyl-A) and GMAA, but extended its sales limits on its other monomers.
In late December 2016 and early January 2017, Dow Chemical and another producer began implementing sales controls on acrylic monomers, stemming partly from a mid-October explosion at BASF’s Ludwigshafen complex in Germany, which eventually constrained US supply.
Acrylic monomers are commonly used to make products including paint and coatings, plastics and construction and pressure-sensitive adhesives.
Other US acrylic monomer suppliers include Arkema, BASF, Lucite, Evonik and Sasol.
Source Icis News
DATE : 2017-05-16
Germany-based oxo-alcohols producer BASF has declared force majeure on US butyl acrylate (butyl-A), according to a customer letter received on Tuesday.
Following an unplanned outage after an “equipment failure” at BASF’s butyl-A production unit in Freeport, Texas, the company notified customers about the force majeure declaration, saying the product is on allocation.
The company did not specify the percentage of that allocation, telling ICIS on Tuesday that its “account representatives are working closely with our customers throughout this process”.
“We do not know the anticipated duration of the plant shutdown at this time,” the BASF letter also stated. “It is unlikely that we will be able to supply all of our customers’ demand, and it may not be possible for us to supply all or some of the needs of non-contract customers.”
BASF added that each order will be subject to review and allocation during this time.
Acrylates already have been on sales control for several months from Dow Chemical and BASF, stemming from a mid-October 2016 explosion and fire at BASF’s plant complex at Ludwigshafen in Germany.
Dow lifted its sales control for most of the acrylates, effective 1 May, but is maintaining sales limits on its butyl-A and 2-ethylhexyl acruylate (2-EHA).
While May free-market contract prices have begun moving lower on softer upstream propylene pressure, recent April contract increases took glacial acrylic acid (GAA) values, for example, to a new range $1.09-1.11/lb ($2,403-2,447/tonne) FD (free delivered), as assessed by ICIS.
Acrylates are commonly used to make products including paint and coatings, plastics and construction and pressure-sensitive adhesives.
Other US acrylates suppliers include Arkema, Dow Chemical and Sasol.
Source Icis News
DATE : 2017-05-12
Lucite International declared force majeure this week, adding to the supply shortness in the European methyl methacrylate (MMA) market, sources said on Friday.
The plant is in the process of restarting, with it currently unclear when normal running rates will be achieved.
Demand remains strong, and many buyers are unable to obtain enough product to meet requirements.
Plastics demand is reasonable, with continued growth from the automotive sector, albeit at a lower rate than last year. Some polymethyl methacrylate (PMMA) buyers are looking at other products, because of the sharp increase in prices.
Third-quarter PMMA contract negotiations have started early, with significant increases being discussed so far. Evonik issued a press release last week saying it was targeting a 23% increase for PMMA for Q3 contracts.
Coatings demand is at the high point of the year, with the seasonal uptick at a reasonable level this year.
However, supply constraints continue to dominate discussions, with many players expecting continued tightness into late 2017.
Buyers are particularly concerned about supply at the end of May, with gaps in production heightened because of the Lucite force majeure.
While some buyers turned to other producers, following the Lucite announcement, others said looking for alternative product was futile, with none available.
Prices in Asia rose in the aftermath of the news, with Asian producers looking to Europe in pursuit of higher netbacks.
The impact on European spot prices was unclear, with no confirmed business heard this week, despite traders saying they received an increase in requests.
May contract negotiations continue, with triple-digit price increases once again being discussed.
The level of the increases targeted by some sellers were lower than in previous months, which could be linked to the stability in feedstock prices.
Contract negotiations continue and are expected to be ongoing for the next few weeks.
April contract prices settled at an increase of €150-200/tonne, bringing the range to €2,250-2,395/tonne FD (free delivered) NWE (northwest Europe)
Q2 MMA prices are at €1,950-2,030/tonne FD NWE, an €300/tonne increase from the first quarter.
MMA is used in the manufacture of acrylic sheet, surface coatings, emulsion polymers and adhesives.
Source Icis News
DATE : 2017-05-11
UK-based methyl methacrylate (MMA) producer Lucite International has declared force majeure (FM), according to a letter obtained by ICIS that was sent to customers on Wednesday.
Force majeure was declared on 10 May, with a technical issue resulting in the temporary shutdown of the facility.
Inventories were already at a low level, with dispatches of both MMA and methacrylic acid (MAA) being temporarily suspended until inventory is recovered, according to the letter.
It is not clear when the FM will be lifted.
Lucite International has the capacity to produce 200,000 tonnes/year of MMA from its Cassel facility in Billingham, northern England.
Global MMA supply remains short, on the back of a series of planned and unplanned outages and strong demand.
MMA is used in the manufacture of acrylic sheet, surface coatings, emulsion polymers and adhesives.
Source Icis News
DATE : 2017-05-04
Finland-based Nokian Tyres is planning to build its first North American tyre manufacturing plant in Dayton, Tennessee, the company announced late on Wednesday.
The company will be investing $360m to build the plant, which will concentrate on the production of car and light truck all-season tyres for North American vehicles.
The plant is expected to have a capacity to produce 4m tyres/year and will include a distribution facility with a storage capacity for 600,000 tyres. The facility will have room for Nokian Tyres to expand capacity to meet future demand.
The company plans to break ground on the project in early 2018 and start up tyre production in 2020.
Nokian Tyres has been best-known for producing winter tyre brands and said it has seen strong year-on-year growth in tyre sales in both Canada and the US.
In 2016, the company increased its warehouse capacity in North America with the opening of a distribution centre in Longueuil, Quebec, Canada, which has a storage capacity of 200,000 tyres.
Globally, Nokian Tyres has two other tyre manufacturing facilities in Nokia, Finland, and in Vsevolozhsk, Russia.
The tyre industry is a major consumer of styrene butadiene rubber (SBR), which is a derivative of butadiene (BD) and styrene.
Source Icis News
DATE :2017-05-07
Polystyrene (PS) production in Venezuela remains down at the local Estizulia plant because of lack of raw materials, a company source confirmed on Thursday.
The 70,000 tonne/year plant has been down since last October, when the company received a shipment of styrene and produced PS for about 15 days.
Plastic processors have resorted to imports from Brazil, Mexico or Colombia to supply their PS resin needs, but even these transactions have become difficult because of the lack of hard currency, local sources said.
The government of President Nicolas Maduro has been under pressure in recent weeks as Venezuelans started marching in the streets demanding solutions to the pressing shortages of basic household products, food and medicine.
The answer from the government has been repression and attempts to change laws with the objective of perpetuating the current power structure.
The government is ignoring suggestions by neighbouring countries to call immediate elections and has pulled Venezuela out of the Organization of American States (OAS).
The protests have resulted in a large number of injuries. Foreign governments are constantly making calls to find a peaceful solution.
The protests, either from the opposition or from government supporters, are causing major disruptions for companies, because many employees cannot reach their jobs on time. The marches usually cause the closure of metro stations, limiting people’s mobility.
Many employers dismiss employees early or alter schedules, seeking to increase the safety of their workers.
Venezuelans appear determined to continue protests until their demands are met.
Source Icis News
DATE : 2017-04-28
China Petroleum & Chemical Corporation (Sinopec) (00386) said its non-wholly owned subsidiary Sinopec Shanghai Gaoqiao Petrochemical agreedto acquire 50% equity interest of Shanghai SECCO Petrochemical Company Limited at US$1,681.5 million from BP Chemicals East China Investments Limited.
The target company is principally engaged in the production and sale of ethylene, polyethylene (PE), styrene monomer (SM), polystyrene (PS) propylene, acrylonitrile (AN), polypropylene (PP), butadiene, aromatics and byproducts; the sale of self-purchased production material and the provision of after-sales service and relevant technical consultation; the application and development of polymers and the provision of auxiliary utilities service to suppliers and processors. It is located in the Shanghai Chemical Industry Park and has 13 chemical facilities leading by ethylene cracking unit with production capacity of 1.09 million ton per year.
Source ET Net
DATE : 201-04-17
Videolar Innova, the integrated styrene monomer (SM) and expanded polystyrene (EPS) company controlled by entrepreneur Lirio Parisotto, is ready to invest R$500mil and increase the capacity of its Triunfo (RS) plant. A raw material supply contract (benzene, ethylene) has been signed with Braskem paving the way for a three stage expansion that could involve R$1bil investments to 2018. Over the first stage it is manufacturing EPS under the Newcell brand. The styrene monomer capacity would reach 420,000 m tons per year and start operations by April 2019. SM is key for the range of products in the portfolio of Innova, polystyrene for general uses, high impact PS and expanded polystyrene.
Brazil presently imports half of the EPS demand and Newcell runs 25,000 m tons, eventually 50,000 m tons per year if demand proves strong. In 2016 Innova had a net income of R$2,05bil, from R$2bil in 2015, with Ebitda of R$332,5mil, less 8,7%.
Sales went up 3,6% to 416,300 m tons, with PS accounting for 237,000 m tons. Net profits were R$384,6mil, five times the R$72,4mil figure in 2015.
Source South America Business Information
DATE : 2017-04-10
High-performance polymer manufacturer Victrex is continuing to drive diversification. The company has acquired Zyex for an undisclosed amount. Zyex manufactures PEEK fibres and mainly supplies the aviation and automotive sectors. In addition to developing new and existing applications, the investment enables exploration of additive manufacturing (3D printing) in the fibres area, says Victrex. Zyex was formed, as was Victrex, from the former chemical company ICI in 1994.
David Hummel, chief executive of Victrex, said: “The acquisition of Zyex is compelling for Victrex, enabling us to drive future growth opportunities within well-aligned markets and developing application areas”. “The company´s capabilities and the teams´ expertise will further complement our product offering. Whilst Zyex is well-established, Victrex’s global reach, innovation focus and proven track record of building new markets offers an attractive opportunity to further develop the business over the coming years. This is in line with our strategy to offer selected and differentiated semi-finished product forms and parts for our customers, building on our core polymer offering”
Zyex´s product range focuses on PEEK polymer based fibres for applications such as process belting, filtration or wiring harnesses, with manufacturing facilities in Gloucestershire, United Kingdom.
Source PlastEurope/MPonline
DATE : 2017-04-13
ChemChina's US$43 billion planned takeover of Swiss pesticides and seeds group Syngenta has received approval from China's Ministry of Commerce), Reuters reports, citing the two companies.
"This represents a further step towards the closing of the transaction, which is expected to take place in the second quarter of 2017," they said in a statement.
China's approval comes without any conditions, Syngenta said in an email.
US and European Union competition authorities gave conditional approval last week and Mexico's anti-trust commission did so this week.
The agreed offer is for US$465 per share. Syngenta shares were up 3 percent at 464.20 Swiss francs (US$461.06) by 1222 GMT on Wednesday.
The deal is one of several reshaping the agricultural chemicals and seeds market, even as such tie-ups prompt fears among some farmers that bigger, more powerful suppliers could push up prices and economize on developing new herbicides and pesticides.
Source Hong Kong Economic Journal Company Limited
DATE : 2017-04-08
Project Status: Planning Stage
Industry: Agriculture
Product: Technical grade pesticides
Project Location: UPSIDC Industrial Area
Project State: Uttar Pradesh
Project Summary: Expansion Of Technical Grade Pesticides Manufacturing Unit In Dist. Amroha, Uttar Pradesh; Best Crop Science LLP is planning an expansion of its technical grade pesticides manufacturing unit in dist. Amroha, Uttar Pradesh.
Project Details: [Info as of: Apr. '16] Best Crop Science LLP, a part of Best Agro Group, is planning an expansion of its technical grade pesticides manufacturing unit at UPSIDC Industrial Area, dist. Amroha, Uttar Pradesh. EQMS India is the consultant. The company has purchased a running technical pesticides plant of Chemtura Chemicals India and is planning to manufacture additional 4,800 TPA technical grade pesticides. The project is waiting for environmental clearance and is planned for completion in 2017. According to MoEF sources, the existing plant manufactures 30 TPA clodinafop-propargyl technical and formulations. The expansion will entail addition of 1,100 TPA herbicide, 2,500 TPA insecticide, 900 TPA fungicide, 100 TPA plant growth regulator and 200 TPA R&D products. The total plot area is 54,891.39 sq. mtrs and 19,200 sq. mtrs has been developed as green belt area. The estimated cost of the project is Rs. 300 million. 2 TPH boiler, in addition to the existing 0.850 TPH boiler will be installed. 99 KLD of effluent will be treated in ETP followed by RO and 85 KLD is to be processed in MEE. The power requirement 1,000 KVA will be met from UPPCL. UPDATE: [Info as of: Mar. '17] Best Crop Science LLP, a part of Best Agro Group, is planning an expansion of its technical grade pesticides manufacturing unit at UPSIDC Industrial Area, dist. Amroha, Uttar Pradesh. EQMS India is the environmental consultant. The expansion will entail addition of a 1,100 TPA herbicide, a 2,500 TPA insecticide, a 900 TPA fungicide, a 100 TPA plant growth regulator and a 200 TPA R&D products. Terms of Reference (ToR) has been received from Ministry of Environment, Forest and Climate Change. The project is waiting for environmental clearance. Work on the project is expected to commence after receipt of environmental clearance.
Company Name: Best Crop Science LLP
Address: Plant address : Plot Nos. C-6, 7& 8, UPSIDC Industrial Area, Phase-II, Gajraula, Dist. Amroha- India.
Pin Code: 244235
State: Uttar Pradesh
Website: www.bestagrochem.in
Source Domex Business Information Pvt. Ltd.
DATE : 2017-04-10
Saudi Methacrylates Company (SAMAC), a joint venture between Saudi Arabia’s SABIC and Japan’s Mitsubishi Rayon, has completed the construction of a new polymethyl methacrylate(PMMA) facility in Jubail Industrial City, Saudi Arabia, SABIC confirmed on Monday.
The plant, the construction of which began in mid-2014, will have a capacity of 40,000 tonnes/year and is expected to take six months to reach that capacity once commissioning begins.
A SAMAC source confirmed in late March that the methyl methacrylate (MMA) plant, which was constructed concurrently with the PMMA plant and has a capacity of 250,000 tonnes/year, is on schedule and will be ready to start in June.
Both plants were built at an estimated cost of Saudi riyals (SR)4.5bn ($1.2bn).
Source Icis News
DATE : 2017-03-30
Dow Chemical-DuPont Merger SK’s last obstacle to its acquisition of Dow Chemical’s ethylene acrylic acid (EAA) business unit has been eliminated due to EU’s approval of the merger of Dow Chemical and Du Pont SEOUL,KOREA30 March 2017 - 11:00amJung Min-hee
As the European Union (EU) has approved the proposed merger of Dow Chemical and Du Pont, SK Group gave a sigh of relief. Now, the company’s last obstacle to its acquisition of Dow Chemical’s ethylene acrylicacid (EAA) business unit has been eliminated.
EU regulators gave approval to proposed Dow Chemical-DuPont merger worth US$130 billion (144.77 trillion won) on March 27. Accordingly, SK Global Chemical is expected to take over Dow Chemical’ EAA business, which deal was signed in February this year, without any problems. If the EU had disapproved the Dow Chemical-DuPont merger, SK’s deal would have adversely affected in any way and fell through in the worst case.
As the obstacle is now cleared, SK will be able to reorganize the business structure more aggressively through M&A. This is because the acquisition of over Dow Chemical’ EAA business unit is the first M&A achievement of Chairman Chey Tae-won after he presented his business policy to create new values according to “Deep Change.”
An official from the business industry said, “SK Group has come up with a 17 trillion won (US$15.27 billion) investment plan this year and announced to take over Dow Chemical’ EAA business unit as symbolic of the plan. When the group fails the acquisition, it could have lost its confidence.”
This year, SK Group pushes ahead with large M&A deals at home and abroad. On the 29th, the bidding for Japan-based Toshiba’s semiconductor unit, which is the world’s second largest NAND flash producer, will be closed. It is hard for SK Hynix to turn away from the deal in order to secure the competitiveness in NAND flash chips, which are a main product in the global semiconductor market. However, the asking price has increased from 2 trillion to 3 trillion won (US$1.8 billion to 2.69 billion) to 20 trillion won (US$17.96 billion) as Toshiba has decided to sell the entire management right. So, SK Group needs to make the group-level strategic decision as it did when acquiring Hynix earlier.
SK Group is also seeking to acquire a stake in Shanghai SECCO worth 1.5 trillion to 2 trillion won (US$1.35 billion to 1.8 billion). Shanghai SECCO is jointly owned by state-owned China Petroleum & Chemical Corp(Sinopec) and British oil major BP. As BP has decided to sell its 50 percent stake, SK Global Chemical has entered the bidding battle for Shanghai SECCO. In the beginning, SK Group was expected to win the deal due to the fact that Chairman Chey is a person with a “special relationship” with Sinopec. However, the situation has become complicated after a Swiss company is trying to buy the company. An official from the industry said, “Sinopec is highly likely to buy the stake but the result can change depending on SK Group’s response.”
Source : Korean Business Daily News