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July 10, 2006
Volume 84, Number 28
p. 8

Acquisitions

Big Deal Deadlines

Billions of dollars and assets change hands as deals close at end of second quarter

Marc Reisch

The money flew as five big transactions closed within the last few weeks, and now thousands of employees are working for new owners.

BASF completed two of the deals. On July 1, the German firm bought Johnson Polymers, with 430 employees, from JohnsonDiversey for $470 million. That same day, BASF closed on the purchase of Degussa's construction chemicals business for more than $3.4 billion.

Archimica Photo

Medicinal Compounding This former Clariant pharmaceutical chemistry unit in Springfield, Mo., now belongs to Archimica.

Charles A. Lorelli, who heads the investment advisory firm Lorelli & Co., says BASF's record earnings and lofty stock price have spurred an acquisition spree that also included the $5.6 billion hostile takeover of pigment and catalyst maker Engelhard early in June. Lorelli chalks up Degussa's eagerness to sell construction chemicals, a business it saw as core only a year ago, to the need of its parent, RAG, to raise cash.

Huntsman Corp. also completed two deals intended to shift its focus away from commodity chemicals and toward specialty chemicals. Late last month, Huntsman sold its U.S. butadiene and methyl tert-butyl ether business to Texas Petrochemicals for $262 million. The firm also completed the purchase of Ciba Specialty Chemicals' textile chemicals business, which includes 4,000 employees, for $270 million.

As Lorelli sees it, Ciba was looking for a way out of what it saw as a mature business, while Huntsman saw an opportunity to snap up textile chemicals at a good price.

The last big deal to close at the midyear was Clariant's sale of its pharmaceutical fine chemicals unit, with 800 employees, to TowerBrook Capital Partners for $140 million. The business has been renamed Archimica.

Just as Rhodia and Degussa dived into the "hot" custom manufacturing sector and stumbled, so too did Clariant, Lorelli says. All three followed the herd in 1999 and 2000, he says, only to pay for it in large write-offs and divestitures later on. "Deals happen for a lot of reasons. It's not always rational," Lorelli says.

Chemical & Engineering News
ISSN 0009-2347
Copyright © 2010 American Chemical Society