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Mergers & Acquisitions

Movers And Shakers

At chemical maker Nouryon, the transformation begins

Former AkzoNobel business eyes billion-dollar acquisitions, expansions, and divestments

by Alex Scott
September 23, 2019 | A version of this story appeared in Volume 97, Issue 37


Photo of pilot plant for making chemicals from cyanobacteria.
Credit: Photanol
In pursuit of sustainability, Nouryon has teamed up with Photanol to make a precursor for monochloroacetic acid from CO2 and sunlight using modified cyanobacteria, shown in this pilot facility.

Enter the headquarters of Nouryon, the former chemical business of AkzoNobel, in downtown Amsterdam, and you wouldn’t notice any changes since it was sold to the investment firms the Carlyle Group and GIC for $11.6 billion a little less than a year ago.

Nouryon and AkzoNobel still cohabit the same AkzoNobel-branded building. Former colleagues from both companies continue to eat in a shared canteen and take coffee together in the ground-floor, open-plan art gallery.

Nouryon at a glance

Headquarters: Amsterdam

Owners: Purchased by the Carlyle Group and GIC for $11.6 billion in October 2018

Previous owner: AkzoNobel

Sales in 2018: $5.8 billion

Pretax profits in 2018: $1.2 billion

Employees: 10,000

Key businesses: Surfactants, chlorine, caustic soda, polymer additives, water treatment chemicals

Source: Company.

Go beyond the electronic entry doors on floors occupied by Nouryon, though, and change is in the air. Nouryon has an eye on acquisitions worth $1 billion or even more. CEO Charles W. Shaver is also looking to sell some of Nouryon’s commodity businesses as part of a new approach to drive up profits and sales by 4–5% annually.

The slowing global economy means that achieving such targets will not be a cakewalk. In a hint of what may lie ahead, the Royal Association of the Dutch Chemical Industry (VNCI) says it expects chemical production in the Netherlands—where Nouryon has a major presence—to be flat in 2019, with only a small increase in 2020.

Nevertheless, the company’s transformation is going well so far, says Shaver, who comes to the job with 35 years of leadership experience, including as CEO of the US firm Axalta Coating Systems. He had expected the carve-out of Nouryon from AkzoNobel, which began in October 2018, to take 2 years. But the process has gone more smoothly than he anticipated, and previously joint systems such as information technology are already totally independent. Shaver now has time to begin planning portfolio changes at Nouryon. He aims to reshape the firm with major acquisitions and divestments within the next 5 years.

Nouryon has about $1 billion readily available for deals but could step the figure up to make a $3 billion–$5 billion acquisition. “In such a case the company would look to Carlyle for additional capacity,” Shaver says. Instead of a single megadeal, another option for Nouryon is multiple, smaller bolt-on acquisitions, he says.

Shaver’s strategy to make Nouryon a predominantly specialty chemical enterprise contrasts with the way Thierry Vanlancker, AkzoNobel’s CEO, had managed the business. Vanlancker’s view was that operating commodity businesses such as salt and caustic soda alongside specialties like surfactants can avoid the peaks and troughs of being in one sector.

Shaver is especially keen to expand Nouryon’s Performance Formulations business. With annual sales of more than $2 billion, it is the largest of the firm’s three businesses, ahead of Industrial Chemicals and Technology Solutions. The backbone of Performance Formulations is its surfactant business. “We are really shining a light on this business,” Shaver says. To this end, the firm announced recently that it will spend $13 million to double its surfactant capacity in Stenungsund, Sweden, to meet growing demand in markets including oil and gas, lubricants, and asphalt.

As well as increasing capacity, Nouryon is seeking to broaden its suite of surfactants. “We want to acquire new technology. We want new molecules that are very sustainable and less persistent in the environment,” Shaver says. “It is definitely a priority for us to grow this business more.”

Another area targeted for growth at Nouryon is polymer additives. For example, the company recently doubled production capacity at its site in Ningbo, China, for dicumyl peroxide, an organic peroxide used to cross-link polymers for applications such as shoe soles.

End markets where the company is seeking to accelerate growth are agriculture, pharmaceuticals, cosmetics, and cleaning products.

Shaver also wants to sell some of the firm’s less-profitable commodity chemical businesses. “We may end up divesting—but probably only 10% of the portfolio, not half,” Shaver says.

Photo of Nouryon CEO Charles Shaver.
Credit: Nouryon
Charles Shaver, an avid fly fisher, wants to shift Nouryon's focus from commodity to specialty chemicals.

Nouryon’s chlorine and caustic soda businesses are a divestment contender, although the company has yet to decide if and when it would sell them. “It is not essential for the company to keep these businesses. But they could enable green hydrogen production, so there are some really interesting upsides to it,” Shaver says.

While Nouryon is still a ways from becoming a producer of environmentally friendly hydrogen, the firm is laying the groundwork via a collaboration with the Dutch gas technology firm Gasunie New Energy and the Dutch airline KLM to make hydrogen by electrolyzing water with renewable electricity. Nouryon and its partners will make a decision on the commercialization of their project sometime in 2020.

“We already understand the chemistry. The question around this project—as always—is quite how to get the economics so they work for everyone,” Shaver says.

In a second hydrogen-focused collaboration, Nouryon has partnered with Shell, Tata Steel, and the Dutch government to provide about $8 million to Dutch universities to create seven research positions aimed at making electrochemistry more efficient.

Nouryon is also seeking ways to sustainably make its existing products. An example is the firm’s partnership with the Dutch start-up Photanol to make a precursor—undisclosed, but likely acetic acid—for monochloroacetic acid from carbon dioxide and sunlight using modified cyanobacteria. Acids are released by the bacteria into water and can then be recovered via distillation. The partners are close to beginning construction of a demonstration plant at Nouryon’s site in Delfzijl, the Netherlands, for start-up in 2020.

Nouryon is also targeting technology improvements through its annual technology competition for start-ups. The competition typically connects the company to over 100 technology start-ups every year. “We want to use this to help us speed up our innovation,” says Marco Waas, R&D and technology director for Nouryon.

The latest iteration of the event, held in May, yielded a new wave of potential partners for Nouryon, including those with expertise in predictive maintenance and automation.

“The automation area is where start-ups can be particularly useful,” Waas says. “Maintenance is an important area for us. As are technologies to link performance of a factory to trigger points like energy prices. We’ve got to have control of a factory so we can react quickly. We want it to be like turning down a fridge by 10–20%,” he says.

The company will maintain its R&D budget of about $130 million per year, including about $20 million spent with external partners. But at Nouryon, technology experts have a greater input than they did before, Waas says.

Shaver is also implementing other cultural changes within the company. Under AkzoNobel, the business was centered in the Netherlands, even though about three-quarters of the firm’s 10,000 or so employees are based elsewhere in the world. “Now we are celebrating the fact that we are global,” Shaver says. “Employees in Asia-Pacific and the US have more of a voice.”

Meanwhile, global economic issues are having little impact on Nouryon, according to Shaver. “It is a road bump we have had to deal with,” he says.

Shaver’s position on the economy is more optimistic than that of the VNCI, which considers current US-China trade issues to be a risk for the Dutch chemical sector. “The outcome of the trade war between the US and China, and of course Brexit, is very relevant for us,” says Pieter Heemskerk, head of administration and management for the VNCI.

While Nouryon is watching the growth slowdown in China carefully, the company’s plan is to continue investing equally in China, the US, and Europe. And Shaver is not deviating from his goal of delivering 4–5% annual sales and profit growth.

Carlyle typically looks to exit its investments after 3–5 years with at least a 20% return on its money. Shaver is adamant, though, that there is no resale date for Nouryon in place. “We have had no conversation about the timing of that,” he says. “The hope is that we go from a good company to an even better one.”


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