Mergers And Acquisitions Go On Hiatus In 2012

Given the poor economic conditions, it’s not surprising that the pace of deal-making slowed in 2012. According to a midyear report by consulting group PricewaterhouseCoopers, chemical makers announced $25.3 billion worth of mergers and acquisitions in the first half of 2012, compared with $55.8 billion during the same period in 2011. Also, companies agreed to fewer transactions in the first half of 2012: 54 versus 66 the year before.

One of the few blockbuster deals of the year was signed in January. That month, Eastman Chemical snapped up specialty chemical maker Solutia in a $4.7 billion transaction. The deal gave Eastman exposure to new markets, such as tires and auto windshield interlayers. The deal also gave Eastman a greater presence in Asia, where Solutia had been expanding aggressively over the years.

The largest deal of the year was Du­Pont’s announced sale in August of its automotive coatings business to the private equity firm Carlyle Group for $4.9 billion. DuPont had been shopping the business around since late 2011 because it wasn’t meeting its criteria of 7% sales and 12% earnings growth.

In another deal involving coatings, Cytec Industries agreed to sell its coatings resins business to the financial buyer Advent International for $1.2 billion. Cytec said it aimed to focus on faster-growing businesses such as advanced composites.

The year saw plenty of takeover drama. Polyvinyl chloride and building products maker Georgia Gulf rejected an unsolicited $1 billion bid from rival Westlake Chemical. Georgia Gulf Chief Executive Officer Paul D. Carrico called the offer an “opportunistic” attempt to buy the firm on the cheap. Georgia also rejected a sweetened $1.2 billion offer from Westlake several weeks later, and Westlake dropped its bid in May.

Later in the year, Georgia Gulf became the hunter rather than the hunted. In July, the firm agreed to merge with PPG Industries’ commodity chemicals unit, a major chlorine producer, in a $2.1 billion transaction. Under the deal, PPG spun off its chemicals unit and merged it with Georgia Gulf.

At the end of the year, PPG took the cash from the deal and bought the North American decorative paints business of AkzoNobel for $1 billion. The deal included the well-known Glidden brand name, 5,000 employees, and eight manufacturing sites.

Another takeover drama unfolded in August, when the private equity firms SK Capital and First Reserve agreed to purchase the C₄ chemicals specialist TPC Group for $850 million. Although TPC’s board was satisfied with the price, some large shareholders weren’t and asked for the deal to be scuttled. Fuel additives maker Innospec, with financial help from the private equity firm Blackstone Group, chimed in with a higher offer. SK and First Reserve came back with an improved bid that TPC shareholders eventually accepted.