Mergers: Deal-Making Activity Heats Up As Economy Rebounds

The improving economy has set off a flurry of chemical industry deals. A total of $22 billion in acquisitions were announced in the first quarter, compared with $13 billion in the 2009 period, according to PricewaterhouseCoopers (PwC), an audit, tax, and advisory services firm.

The value of chemical deals actually consummated in the quarter was a much more modest $4.5 billion, reports investment banking firm Young & Partners. But President Peter Young points out that the figure was up by a factor of 10 compared with the first quarter of last year.

Young says most of the finalized acquisitions had price tags under $500 million. The exception was Mitsubishi Chemical’s purchase of Mitsubishi Rayon for $1.9 billion. The buyout of fertilizer maker Terra Industries by rival CF Industries for $4.7 billion wrapped up in April, just after the end of the quarter.

Other potential mega deals announced in the quarter include Dow Chemical’s plans to sell its Styron business to Bain Capital for $1.6 billion. And Air Products & Chemicals is angling to acquire Airgas for a little over $7 billion. In addition, PwC lists Cognis as another potential acquisition target with a large price tag.

The recession caused the number of completed deals to hit a trough in the first quarter of 2009, Young reports. This year’s activity is spurred on by higher confidence in the earnings of target companies, he says, as well as more cash on the balance sheets of firms looking to buy.