Chemical Industry Consolidations: It’s about time

In a chapter for my second book, The Chemical Industry at the Millennium, my friend John Roberts, a leading chemical industry analyst, discussed the broad and varied landscape of the chemical industry some ten years ago. He pointed out that in several other key industries (auto, detergents, semiconductor, banking,etc) huge consolidations had taken place, a process that had not occurred to a great extent in chemicals.

It’s amazing how quickly things changed over the last few years with these acquisitions:

Dow/Rohm and Haas;   BASF/Engelhard, Cognis, Ciba; Solvay/Rhodia; Ashland Chemical/ISP; Ecolab/Nalco; Eastman Chemical/Solutia; Lonza/Arch Chemical; Clariant/Suedchemie;Berkshire Hathaway/Lubrizol(not a consolidation).

Trends behind these acquisitions include (a) Desire for size and global reach, (b) Higher margins and differentiation opportunities in specialty chemicals, and (c) Shifting some sales into products alined with megatrends (“green”, clean water, etc).

Another interesting development over recent years is the
shale gas “revolution”, which has pumped a great deal of new life into our domestic petrochemical industry and has made our old crackers much more valuable than before. That may also lead to acquisitions.

What happens next? Hard to tell. The Motley Fool early this year listed Celanese, FMC, Rockwood, Huntsman and CFIndustries as interesting acquisition targets. In the specialty chemicals area Albemarle, Cytec, Fuller, and Croda International may feel some heat.

The chemical industry used to be a gentlemanly place where even the idea of a hostile acquisition was usually shunned. Things are changing and we need to watch this space.

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