Arkema bags Ashland’s adhesives business

Continuing its push into the adhesives industry, Arkema has agreed to acquire Ashland’s adhesives business for $1.65 billion.

Adhesives made by Ashland include Isoset water-based polyurethane wood glues and Aroset acrylic pressure-sensitive adhesives for applications including floor graphics and packaging labels. The business is expected to have sales of $360 million this year and pre-tax profits of $110 million.

The purchase, expected to close by year-end, reinforces Arkema’s position as one of the world’s biggest producers of adhesives and builds on a string of buys in the sector, including its 2015 purchase of Bostik from Total for $2.2 billion.

Arkema says the deal also marks a “new milestone” as it strives to become a pure specialty chemical firm by 2024. “This project perfectly aligns with the group’s ambition to become a pure specialty materials player,” the firm says. Arkema expects the acquisition to create “significant” pre-tax savings and a boost in net earnings per share in the first year after completion.

The deal is in keeping with an overall trend of increased merger and acquisition activity in the chemical sector, says Bernd Elser, managing director for chemicals at the consulting firm Accenture. “It’s a sign of confidence in the future. No one is doing an M&A deal if the environment is highly uncertain,” he says.

The fragmented adhesives sector is especially ripe for deals, Elser says, pointing to multiple epoxy and adhesives companies with annual sales of about $100 million that could be involved in M&A.

Meanwhile, Ashland says the sale will enable it to focus on ingredients for the life sciences, personal care, and coatings. Analysts at the investment firm Jefferies Financial Group, though, say in a research note that a sale of Ashland’s industrial-focused specialty additives business also “seems possible.”

Ashland acquired a substantial part of the adhesives business via its acquisitions of Hercules in 2008 and International Specialty Products in 2011.