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Chemical Maker Altana Is Drawn West

German specialties firm targets U.S. market for growth

by Marc S. Reisch
October 7, 2013 | A version of this story appeared in Volume 91, Issue 40

The acquisition last December of Chemical Corp. of America, a specialty wax maker, was just the beginning of a U.S.-oriented buying binge for the German specialty chemical firm Altana.

In July, Altana agreed to spend $635 million to buy Rockwood Holdings’ rheology modifier business, bringing annual sales of $191 million, 40% of which are in the U.S. In August, Altana bought the mostly North American specialty coatings business of German consumer products maker Henkel.

Leading the expansion is Altana’s German-born, U.S.-educated chief executive officer, Matthias L. Wolfgruber. The reason for targeting the U.S., he says, is that the country “is experiencing a revival in Altana’s target electrical, coatings, inks, and plastics markets.”

Wolfgruber
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Photo of Matthias Wolfgruber, CEO of Altana.

The firm Wolfgruber leads doesn’t have the name recognition in the U.S. of a Dow Chemical or a DuPont, but it enjoys other qualities that serve it well: little debt, good profits, and a deep-pocketed financial backer. Altana is owned by Susanne Klatten, Germany’s richest woman.

And although Germany and the U.S. each accounted for about 16% of Altana’s $2.2 billion in 2012 sales, its U.S. sales are growing much faster, Wolfgruber points out. Sales last year grew 3% in Germany but 10% in the U.S.

Only China, with a 15% share of Altana’s global sales, is experiencing sales growth comparable with that of the U.S. But whereas China’s growth is largely caused by the country’s rapid industrialization, in the U.S., plentiful natural gas and raw materials are opening doors.

Altana’s main businesses are in paint and plastic additives, metallic pigments, electrical insulation, and inks. Customers for these products are no longer leaving the U.S. for lower-cost countries, Wolfgruber notes, and in some cases are actually reinvigorating their U.S. manufacturing base. “We have to be present where our customers are, and we need to keep and increase our market share,” he says.

Other European chemical company CEOs, such as Solvay’s Jean-Pierre Clamadieu and Clariant’s Hariolf Kottmann, have also noted the importance of the U.S. to their future growth. And they all offer similar reasons: plentiful energy and raw materials and a swelling customer base.

In addition, Wolfgruber has an affinity for the U.S. After receiving his Ph.D. in chemistry from the Technical University of Munich, he did postdoctorate research at the University of California, Berkeley. During a 17-year stint at silicones maker Wacker Chemie, he spent eight years in the U.S. where, before joining Altana in 2002, he headed Wacker’s U.S. operations.

“I always admired the entrepreneurship and risk-taking in the U.S. compared to more conservative regions,” Wolfgruber says. He has tried to instill those traits in the firm’s R&D organization, he says, where he encourages researchers to “anticipate customer needs.”

Altana spent about $130 million last year on R&D, up 17% from the year before. The company devotes about 6% of sales to research, about twice what chemical firms on average commit to the effort, according to C&EN’s annual R&D spending survey (C&EN, March 11, page 16). Nearly 900 people—about 15% of its global staff—work at the firm’s research facilities, Wolfgruber says.

“R&D is the lifeblood of our business,” he explains. “If you want a differentiated position, you need to constantly invent better-performing and differentiated solutions.” Such efforts, he says, helped the firm earn a 19% return on sales before taxes and other adjustments last year.

If there is any secret to Altana’s success in R&D, it’s the firm’s willingness to embrace the minutiae of its customers’ businesses. “Some companies try to take out complexity, but not us,” Wolfgruber says. “Effectively managing complexity helps us to maintain our specialty character.”

For instance, the firm leveraged its additives expertise to develop organic pigment wetting and dispersion agents widely used for vivid color in flat-panel displays, Wolfgruber says. The firm also developed a polyamide-imide insulation film for high-temperature electrical insulation applications. The polyamide-imide costs less than polyimide but performs just as well, he claims.

In addition, Altana is working with printers and others to enable the printing of simple electronic devices, such as radio frequency identification tags, on the same type of equipment now used to print newspapers and packaging materials. Although many consortia, such as at the Holst Centre in the Netherlands, are focusing on high-tech printed electronic techniques, “We think there is a greater need for printing systems that work in traditional print shops,” Wolfgruber says.

Observers say Altana has what it takes to grow and compete as a specialty chemical maker. Altana is an “inventive and creative” firm, says Phil Phillips, managing director of the coatings industry consulting firm Chemark Consulting. He calls Eckart, a Painesville, Ohio-based maker of metallic-effect pigments that Altana bought in 2005 for $760 million, a “top-notch player.”

Wolfgruber says he intends to keep Altana at the forefront of specialty chemical makers. Sales will more than double to $4.5 billion by 2020, he predicts, and returns on sales will continue to stay above 18%.

During this time, the U.S. will remain among the firm’s most important markets. “The U.S. is an innovation driver,” Wolfgruber says. “We need to be there.”

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