Intellectual Thoughts by Sanjay Panda: Finechemicals


Showing posts with label Finechemicals. Show all posts
Showing posts with label Finechemicals. Show all posts

Largest U.S. chemical companies to combine in megamerger. Could spark more deals!!



Two American  Chemical giants and possibly among the oldest,  DuPont and Dow Chemical  have agreed to combine in an all-stock merger valued at $130 billion  which  would be the 18th largest deal ever.
 

Dow Chemical Co. and Dupont Co. that are 118 and 213 years old, respectively, announced the blockbuster, tax free  deal that would take two years to complete.  Following the completion of the deal's in 2016, the  merged entity  would eventually    will  break up  into  3 separate, publicly-traded entities focusing on Agricultural products, Material sciences, and Specialty products.


The deal, the fifth-largest corporate merger of 2015, would certainly receive scrutiny from federal regulators, especially regarding the new companies  place in global agricultural production, including seeds, insecticides, and pesticides. Executives from both companies  however said the agrochemicals businesses have little overlap and any asset sales would likely be minor.


By revenue, the material sciences company – which makes products for the packaging, transportation, and infrastructure industries, to name a few – will be the largest. Its combined revenue in 2014 was around $51B on an adjusted basis. It will compete with the likes of corporate titans BASF, Honeywell, and 3M.


The specialty products company, with a combined revenue of $13B in 2014, would sell materials to the electronics and communications industries, among others.


The agriculture company, focusing on seeds and chemicals, would have a combined adjusted revenue of $19B overtaking BASF as the leader in agrochemicals. In the seed industry, DowDupont is pitted against behemoth Monsanto.


Dow shareholders would own 52 percent of the new company after preferred shares are converted, the companies said. The agreement includes a $1.9 billion termination fee under specified circumstances, such as rejection by shareholders.
The biggest impact will certainly be in the agriculture market, where the seeds and crop chemical industries are to undergo rapid consolidation


Prior to the merger, Dupont said in a statement it will slash $700 million in costs, with ten percent of its workforce "impacted" by the move, while Dow is expected to drop $300 million in costs.


As per Dealogic , this   merger would represent the 18th largest corporate deal of all-time. It would trail the 2015 deals made by Allergan and Pfizer, Anheuser-Busch InBev and SABMiller, BG Group and Royal Dutch Shell and Time Warner Cable and Charter Communications.


Dow and Dupont have a combined annual revenue of around $83 billion, with operating profit of about $15 billion.

Pfizer regains pole position by acquiring Allergan in a $160B deal.



Pfizer and Allergan are joining in the biggest buyout of the year, a $160 billion stock deal that will create the world's largest drugmaker. The deal is the latest and the largest to be aimed at helping an American company lower its taxes by reincorporating overseas, a practice known as a corporate inversion. The transaction would be structured as a so-called reverse merger, in which Allergan, the smaller of the two companies, would technically be the buyer.

Pfizer will keep its global operational headquarters in New York but   its legal domicile and principal executive offices in Ireland.  Legacy Pfizer expected to lead the combined company which will be called Pfizer Plc, which would have more than $63 billion in combined sales and a product portfolio that includes Viagra, Celebrex, Botox , Juvéderm and  about 110,000 employees worldwide.

Under the terms of the all-share deal, Pfizer would essentially pay $363.63 for each Allergan share .  Allergan shareholders would receive 11.3 shares of Pfizer for each share of Allergan they hold. Pfizer shareholders would receive one share in the combined company for each share they hold, but have the option to take up to $12 billion in cash for some or all of their shares instead.

Pfizer Inc. Chairman and CEO Ian Read will serve in the same roles with the combined company while Allergan Plc. leader Brent Saunders will become president and chief operating officer. The combined company’s board would consist of 15 directors, with Pfizer’s 11 current directors and 4 directors from Allergan.

After the transaction, Pfizer shareholders are expected to own about 56 percent of the combined company, with the remaining 44 percent owned by Allergan shareholders The combined entity expected to achieve more than $2 billion in annual cost savings over the first three years after the deal closes.

Pfizer said that it expected the combined company’s adjusted tax rate to be between 17 percent and 18 percent by the first year after the deal is finalized. Last year, Pfizer’s tax rate was about 26.5 percent, and it is expected to be about 25 percent this year. By comparison, Allergan reported a tax rate of just 4.8 percent for 2014 and is expected to have a tax rate this year of about 15 percent.

Pfizer, based in New York, has engaged in several large deals in recent years, buying Wyeth in a $68 billion  deal and  Hospira, a maker of generic treatments, for about $17 billion this year.

Allergan was created through several mergers since 2012 that included the drug makers Forest Laboratories, Actavis and Warner Chilcott.


The deal would enable Pfizer to surpass  Novartis AG  and regain the industry's top spot.

Evonik to Acquire Monarch Catalyst of India



Evonik Industries   to strengthen its global catalysts business, has signed an agreement with Monarch Catalyst Pvt. Ltd., India to acquire 100% of the company’s shares. The transaction is expected to close during the first half year of 2015 subjected to  regulatory approvals.


Evonik with its Business Line Catalysts is a global leader in producing specialty catalysts, custom catalysts and catalysts components for the Life Sciences & Fine Chemicals, Industrial & Petrochemical and Polyolefines market segments. This bolt-on acquisition in India with annual sales in the low double-digit million € range complements Evonik’s leading positions in activated base metal catalysts and precious metal catalysts. Monarch’s global oils & fats hydrogenation catalysts business is a broadening of the Evonik catalysts portfolio. Monarch Catalyst has about 300 employees.

Dishman buys Solvay fine chemicals

Dishman Pharmaceuticals & Chemicals has made another incursion into European assets by signing a memorandum of understanding to acquire the fine chemicals, vitamin D and vitamin D analogues business of Solvay Pharmaceuticals at Veeenendaal, Netherlands। The deal is expected to close within four months। Dishman added that the acquisition”will not only increase the basket of products of Dishman but also bring in new customer relationships”.

Indications are that vitamin D3 production will be transferred to India, thus bringing more fine chemicals expertise there, while the other products will remain in the Netherlands. For Solvay, the sale of the two businesses will enable it to focus more on its core areas of cardio-metabolic and neuroscience treatments.

More importantly, Dishman’s existing contract under to supply about 90 tonnes/year of the API for Teveten (Eprosartan Mesylate), Solvay’s anti-hypertensive drug, will not change. The contract expires in December 2008, but can be renewed annually until its patent protection ends in 2013. Since an FDA inspection at its Bavla site in 2006, Dishman has been able to supply this API for use in the US as well as Europe.Separately, Dishman has announced the integration of another of its previous European acquisitions, SynProTec DCR of the UK, into CarboGen-Amcis.

SynProTec DCR specialises in process research and custom synthesis of pharmaceutical intermediates and has capacity of up to 4,500 litres for production of early phase APIs and large-scale intermediates. Griffiths said that capacity combined capacity will increase and material produced at SynProTec DCR can be further processed at CarboGen Amcis’s Swiss facilities.

Mylan to buy Merck Generics Unit

Mylan Laboratories Inc. agreed to buy Merck KGaA's generic-drug unit for 4.9 billion euros ($6.7 billion) in cash to become the world's third-largest maker of generics.The acquisition will create a company with 2006 sales of about $4.2 billion. Mylan has arranged debt financing from Merrill Lynch & Co., Citigroup Inc. and Goldman Sachs Group, Inc. Mylan beat a rival bid by Teva, according to several people familiar with the transaction. Darmstadt, Germany-based Merck is selling the unit to pay down debt for its $13.7 billion acquisition of Serono SA.

The purchase, the biggest in generics since Teva Pharmaceutical Industries Ltd.'s $7.6 billion takeover of U.S.- based Ivax Corp. in January 2006, brings to an end a four-month battle for the world's fourth-largest maker of generics. The price Mylan is paying is more than five times its own sales in the year ended March 2007 of $1.26 billion and more than its own market capitalization of $5.39 billion. The acquisition comes almost two years after Mylan's failed $4 billion bid to buy King Pharmaceuticals Inc., the Bristol, Tennessee-based maker of the heart pill Altace. Mylan in January completed the $560 million purchase of a controlling stake in Secunderabad, India-based drugmaker Matrix Laboratories Ltd., giving the U.S. company access to lower-cost labor and materials. Mylan was the third-largest seller of generic drugs following Teva and Sandoz respectively. Actavis, Stada Arzneimittel AG, Ranbaxy and private equity bidders including Apax Partners Worldwide LLP and Bain Capital LLC also vied for the Merck unit, according to people with direct knowledge of the process.

Pfizer Earnings Fall on Drop in Norvasc, Zoloft Sales

Pfizer Inc.'s first-quarter profit fell 18 percent and the drugmaker cut its 2007 forecast, as competition from cheaper drugs hurt two of its best-selling products, Norvasc for blood pressure and Zoloft for depression.Net income for Pfizer, the world's largest drugmaker, declined to $3.4 billion, or 48 cents a share, from $4.1 billion, or 56 cents, a year earlier.Revenue this year will be $1.2 billion less than Pfizer projected after an adverse court ruling accelerated generic competition to Norvasc, and sales of the inhaled insulin treatment Exubera missed targets, the company said. Zoloft also faces generic rivals. Pfizer has said it is cutting 10 percent of its workforce by 2008 to offset the lost revenue.

The impact of generic Norvasc, coupled with increased promotional spending around Exubera, are contributing to a greater decline.Pfizer shares fell 10 cents to $26.97 at 4:02 p.m. in New York Stock Exchange composite trading. The stock has risen 8.1 percent in the past 12 months. The shares have lagged behind the 14-member Standard & Poor's 500 Pharmaceutical Index, which has increased 20 percent in the past 12 months.

Revenue rose 6 percent to $12.5 billion on higher drug prices and an 8 percent raise in sales of its top-selling drug, the Lipitor cholesterol pill, the company said today. Profit excluding certain costs was 68 cents a share, beating the average estimate of 17 analysts surveyed by Bloomberg.

U.S. regulators today also favorably reviewed Pfizer's experimental HIV/AIDS drug maraviroc, according to documents posted on the Food and Drug Administration Web site. The agency staff report said maraviroc was effective and caused no unusual deaths A panel of advisers will recommend April 24 whether the FDA should allow the drug to be marketed.
Net income this year will fall to $1.30 to $1.41 a share from $2.66, before Pfizer sold its consumer unit, the company said. Excluding certain costs, profit will be $2.08 to $2.15 a share, lower than the $2.16 average estimate of 24 analysts surveyed by Bloomberg. Pfizer's January forecast was for $2.18 to $2.25.
The drugmaker will close two U.S. plants and five research centers in the U.S., Japan and France.
Lipitor sales rose 8 percent to $3.4 billion, beating the $3.1 billion estimated by J.P. Morgan & Co. analyst Chris Shibutani in New York.Prescriptions for Lipitor, which makes up about 40 percent of Pfizer's profit, have declined after cheaper, generic versions of a similar pill, Merck & Co.'s Zocor, became available last June and newer drugs, including Merck and Schering-Plough Corp.'s Vytorin and Zetia, have been gaining popularity.

Pfizer increased sales by raising the price 4 percent to 6 percent and offering fewer discounts, said Ian Read, Pfizer vice president of worldwide pharmaceuticals.Lipitor itself may lose patent protection as early as 2010 in the U.S. Pfizer is appealing a decision by a Canadian court to throw out its Lipitor patent. Lipitor had $800 million to $900 million in 2006 sales in Canada.
Sales of the two-year-old pain medicine Lyrica more than doubled to $395 million and sales of the smoking-cessation drug Chantix, approved in the U।S. in May, were $162 million.

Bloomberg

BASF sells Wibarco to Hansa Chemie

BASF has agreed to sell its Chemische Fabrik Wibarco subsidiary, which had been part of its Performance Chemicals division, to Hansa Chemie International, a Swiss-based holding company with stakes in a number of chemicals companies in Germany, Switzerland and the Netherlands। Terms were not disclosed. Once regulatory approval is granted, the deal should be completed in July.
Wibarco is based at Ibbenbüren, northern Germany, and employs about 80 people, who will all transfer। It mainly produces linear alkylbenzene (LAB), a starting material for linear alkylbenzene sulphonate (LAS), an ingredient in most modern detergents.

BASF explained that it regarded Wibarco as non-strategic, because LAB is not fully integrated into its Verbund concept, although it remains a strong player in detergents and cleaners. Hansa, by contrast, will be able to integrate Ibbenbüren into its surfactants value chain. It will add a new sulphation plant to the 37-year-old LAB facility at the site.

Dow Chemical May Become Takeover Target

Dow Chemical co, may become a takeover target even though Chief Executive Officer Andrew Liveris said he isn't interested in selling the largest U.S. chemical maker. Liveris fired executives Pedro Reinhard and Romeo Kreinberg yesterday for holding unauthorized talks with possible private- equity bidders. Shares of Dow jumped 2 percent yesterday, giving the company a market value of $44.1 billion. Shareholders may be open to a buyout. Dow had gained 8.5 percent in the 12 months before April 8, when the possibility of a buyout was reported in Britain's Sunday Express newspaper, trailing the 16 percent gain for the Standard & Poor's 500 Chemicals Index.
The shares trade at 10.8 times annual earnings, the lowest in the 13-member index, compared with 17 times for DuPont Co. and 37 times for Monsanto Co. Dow's profit excluding items, $3.82 a share last year, may drop to $2 to $3 a share by 2010. Sales totaled $49.1 billion last year.
U.S. buyout firms, including Kohlberg Kravis Roberts & Co., were joining with Middle East investors to prepare a takeover bid of at least $50 billion, according to the Sunday Express. Liveris, dismissed the report at the time, saying Dow had held no merger talks, and the board issued a statement saying it backed the CEO's strategy. The shares rose 4.9 percent nonetheless. The cost of five-year credit-default swaps on Dow debt more than tripled since February on investor expectations of heightened risk. Contracts on $10 million of Dow debt increased $1,000 today to $55,500, close to a two-year high, according to CMA Datavsion. Investors use credit-default swaps as an alternative to bonds to speculate on corporate indebtedness.

Kreinberg, yesterday denied the company's accusations that he held unauthorized talks with banks and foreign governments about a planned takeover, calling the claims unfounded and unsubstantiated.'' Reinhard, 61, was Dow's chief financial officer for 10 years. He said the two men were getting legal advice and declined to comment further.Dow spokesman Chris Huntley, responding to Kreinberg's comment, said, ``We have the information from a highly reliable source that would know what was going on, and who we have absolute confidence in.'' He reiterated Liveris's comments that the company has had no talks to be acquired.

A group of private-equity firms may offer to buy parts of the company, the Financial Times reported on Jan. 19. The stock surged 5.6 percent on March 15 on speculation Dow would combine assets with India's Reliance Industries Ltd. The Times of India said on Feb. 26 that Reliance may bid for Dow.

Dow may attract Middle East bidders that want to diversify away from oil and natural gas, Butler Wick's Batcheller said. The Express reported that at least half the financing for the KKR bid would come from investors in Saudi Arabia, Kuwait, Bahrain, Qatar, the United Arab Emirates and Oman.

The company's ratio of net debt to capital is 28 percent, a level that adds to its takeover appeal। Even if Dow isn't sold, the company may use the cash to expand production of faster-growing specialty chemicals.Other analysts said a takeover of Dow is unlikely. Goldman Sachs Group analyst Robert Koort said the premium a hostile bidder would need to pay for Dow wouldn't justify the returns, given that chemical profits are in a cyclical decline.

Bloomberg

Strategy- BASF, The Chemical company

In German, it is called the Verbund. Jürgen Hambrecht, the chief executive of BASF, describes his company's sprawling complex of pipes, towers and storage tanks as the “ultimate business cluster”. Spread over ten square kilometres (four square miles), it is the biggest integrated chemical site in the world. At first glance, BASF's third-quarter results, out on November 2nd, did not look great. Profits plunged because of restructuring costs at Engelhard, an American producer of catalysts (as in catalytic converters) which BASF bought earlier this year. And, on the same day, BASF announced 2,000 job losses.

But the underlying trend at BASF is surprisingly healthy, given that it is an old-fashioned manufacturing company in a part of the world where heavy industry tends not to flourish these days. It more than doubled its profits between 2002 and 2005. One-off charges aside, its third-quarter results suggest the company is in line for a 20% increase in turnover this year to over €50 billion ($64 billion), with pre-tax profits up 11%. Although many industries are fleeing from Europe to less costly countries, the efficiencies of the Verbund show how a traditional business can remain highly competitive, even when it operates in an expensive place like Germany. The complex at Ludwigshafen, across the Rhine from Mannheim, comprises up to 250 individual chemical factories turning out 8,000 different products. These range from simple petroleum distillates to sophisticated nanomaterials—tiny particles which can be used to change the properties of plastics or other substances. BASF employs about 36,000 people in Ludwigshafen, where it also has its headquarters. Many travel around the site on red works bicycles, individually numbered.

range from simple petroleum distillates to sophisticated nanomaterials—tiny particles which can be used to change the properties of plastics or other substances. BASF employs about 36,000 people in Ludwigshafen, where it also has its headquarters. Many travel around the site on red works bicycles, individually numbered.

The site's legendary efficiency comes from extracting the last drop of value from every chemical reaction. It makes use of the numerous by-products from each process. At other places these are often sold or shipped from one factory to another for further processing. At the Verbund, what is left over from one process is used only a few hundred metres away to make something else. This saves BASF a fortune. Compared with having, say, 70 separate factories some 100km apart, BASF calculates its cluster enjoys annual savings of €300m ($380m) in logistics, €150m in energy and €50m in infrastructure.

For Mr Hambrecht, the Verbund represents a huge advantage in an industry in which competition is increasing, especially in Asia. So BASF is trying to replicate the benefits of its cluster, not only in other countries but also at the corporate level. Instead of splitting into lots of firms specialising in one chemical, as many giants have done, BASF is seeking to become an even bigger conglomerate.
Mr Hambrecht, who is 60, has spent half his working life at BASF, which was founded in 1865 as Badische Anilin- & Soda-Fabrik. Anilin was once important in making dyes; soda is used in glass, soaps and textiles. Today the company's products end up in goods ranging from cars to electrical goods, cosmetics, sports equipment and medical devices.

Mr Hambrecht enthuses about “the industry of industries”. Indeed, chemicals seem to be in Germany's blood. The country accounts for a quarter of the chemical industry's sales in Europe and a similar share of employment there. Germany supplies more than 12% of world exports of chemicals, the biggest single share. And the German industry spends a higher proportion of its revenue on research and development than that of any other country.In many countries, chemical factories are hardly the subject of civic pride. They are in Germany. In September an “open day” attracted thousands of visitors. Frankfurters, in particular, are proud of the huge chemical complex straddling the river Main at Hoechst, west of the city. Though Hoechst, once the local chemical giant, was absorbed into sanofi-aventis of France in 1999, its Frankfurt site still churns out polymers, pigments and pharmaceuticals. The former Hoechst headquarters, a redbrick relic of the 1920s, is an admired piece of Bauhaus architecture. Yet few sites are as efficient as the Verbund. A recent study of Germany's chemical industry by A.T. Kearney, a consultancy, found that most other production centres had big gaps in their “value chain”: raw materials and by-products had to be shipped around, at extra cost. The reasons are often historical or political. A complex at Leuna in east Germany, for example, was cleaned up at huge expense after German unification. It has never achieved its potential, even though firms such as Dow Chemical, Linde, Total and BASF have operations there. Other sites are too small or are underused, but cannot be closed for political reasons. BASF has recently been adding to its product range in a big way. In March it bought Degussa Construction Chemicals, part of a German maker of specialty chemicals, for €2.7 billion; in May it spent $470m to buy America's Johnson Polymers and in June it paid $5 billion for Engelhard, the cause of the profits crash.

Asia starts producing

Although these European and American additions bolster its business, BASF cannot ignore developments elsewhere. Ever bigger petrochemical and other downstream production facilities are being built in the Middle East. And burgeoning demand in Asia, particularly in China, is resulting in more chemicals being produced locally. Moving into developing regions can have benefits beyond lower production costs. It can allow chemical companies to get closer to both suppliers of raw materials and more potential customers. It nearly always makes sense to produce bulky chemicals, such as washing powder, where they are sold, to keep transport costs low. This puts places like China, which is a long way from the big Western consumer markets, at a disadvantage in exporting some products. But there are plenty of others to be made. Anything that can be conveniently put into a container and shipped cheaply is likely eventually to be made in Asia's low-cost factories.

Hence even BASF is having to shed businesses in which it thinks it is no longer competitive. The next to go may be a factory in Minden, Germany, which among other things makes caffeine. The Chinese now offer caffeine, which is easy to ship, to firms such as Coca-Cola at a third of the price that European factories can. Nevertheless, demand in China is so great that it will be many years before the country becomes a net exporter of chemicals, Mr Hambrecht believes. Demand across Asia is strong. Around half of future worldwide demand for chemicals is expected to come from the region. BASF already has almost 19% of its turnover in Asia, up from just 9% in 1995.

As it expands overseas, BASF is trying to replicate the Verbund concept. It has built smaller versions of the cluster in Belgium, Texas, Louisiana, Malaysia and China. The foundations of its Chinese factory in Nanjing were laid in 2001. Last year petrochemical production began there in a joint venture with Sinopec, a Chinese oil company. Mr Hambrecht, who fought internal opposition to the investment, believes that such opportunities in Asia offer European chemical companies their only chance to grow faster than at home. Chemical companies can be highly vulnerable to changes in the price of raw materials. Here too BASF hopes to gain some protection from its cluster effect. As long ago as 1969 it bought Wintershall, an oil producer. It has proved to be a useful hedge against oil-price rises. BASF is now trying to secure its lines of supply from Russia by a joint project with Gazprom to build a gas pipeline across the Baltic. It also has a share in a west Siberian oilfield. BASF was mining coal until the late 1980s, and today even that might again make sense. The company's expansion into energy seems set to continue: it recently announced plans for a joint-venture biodiesel plant in Belgium, which will use rapeseed and other organic material to produce fuel. Indeed, oil and gas provided 40% of the group's profits in 2005.

Other giants in the chemical industry have spun off various divisions to narrow the spectrum of their business . For instance, Bayer, Germany's second-largest chemical firm, listed its specialty chemical division, Lanxess, as a separate company in January 2005. Although the trend in the industry is to put new labels on bits of the business, such as “life sciences”, which includes health and food, or “coatings”, which includes paint, BASF still brands itself as “The Chemical Company”. The one business it has quit is pharmaceuticals, accepting that there is little overlap between drugs and its other products.

The diversity of its operations makes BASF unpopular with some investors because it muddies their view of the firm as a “pure play” on chemicals. Mr Hambrecht is unrepentant. He argues that conglomerates are better overall long-term performers than specialists. Through diversity, he maintains, companies can weather poor performance in one or two of their divisions. The specialist can also be more vulnerable to disruptive technology and the sudden substitution of one material for another. This is a particular risk for the chemical industry in Germany, which is highly exposed to the car business. Almost 70% of the German industry's innovations, such as smarter or lighter materials, go into vehicles. But it is harder to apply the Verbund effect in the developing field of biotechnology. A big handicap for BASF is the German government. Despite vowing in its coalition agreement last year to clear the way for genome technology, the government has since dragged its feet. Bayer is developing genetically modified rice, rape and cotton, but in America not Germany. BASF has the majority of its biotech research in Europe and believes Germany to be an excellent place for genome activities. But, says Mr Hambrecht, the government's attitude risks driving it away.

The virtue of virtuality
Perhaps the biggest danger to the Verbund, and the conglomerate-building which it encourages, is that it could lack the flexibility to cope with rapid market changes. But a variation of the concept might overcome this. This is the “virtual” Verbund; a large chemical site where a number of independent companies could voluntarily work together to achieve the same economies of scale, but use different processes as market conditions change. A.T. Kearney suggests that something like this might be done at some of the chemical sites in Germany where production capacity is underused. A European Union project supported by seven big companies, including Siemens and Degussa, is trying to get the idea going by streamlining test-production. Called Impulse, the project aims to reduce the cost and time of research and development by miniaturising test equipment. This would primarily benefit smaller, more flexible companies. The political objective is to keep jobs and factories in Europe.

Perhaps such initiatives might one day steal away some of the Verbund's advantages. But not yet. For now Mr Hambrecht, whose contract with BASF runs until 2011, is confident in the future prospects of his firm. As he jogs through the vineyards near his Rhineland home in the early morning he can indulge in thinking up new things to make.