Chemical Industry Undergoing Major Restructuring: Global Third Player "Swallows" Global Second
In 2023, many companies experienced the longest chemical inventory reduction process in recent memory, surpassing the levels seen during the 2008-2009 global financial crisis. So far in 2024, the situation faced by chemical companies has improved, but a significant recovery is still far off.
Since September, major chemical enterprises have gone through a series of mergers, divestitures (restructuring), and exits (sales), signaling continued large-scale adjustments in the chemical industry. Amid the current global economic downturn, even industry giants find it difficult to maintain unchanging "core businesses." It is expected that more chemical giants will adopt business splits and implement "focus strategies," rigorously cutting non-strategic or low-return businesses. By optimizing business management, they aim to enhance competitiveness, while giving the divested business units more room for growth, ultimately improving the overall profitability of the companies.
Global Third Acquires Global Second: A Major "Reverse" Takeover
On October 11, India’s Sudarshan Chemical Industries Ltd. (SCIL) announced that it had reached a definitive agreement to acquire Germany-based Heubach Group through a combination of asset and stock transactions. The deal is expected to close within 3-4 months, subject to customary closing conditions. Public records show that Heubach is the world's second-largest pigment chemical company, while the first and third largest are DIC Corporation and Sudarshan, respectively. This marks a "reverse" takeover, where the third-largest company acquires the second-largest.
Heubach operates 17 production sites across the globe, including in Germany, the U.S., and India, and generated over €1 billion in sales revenue (around 7.544 billion RMB) in the 2021-2022 fiscal year. Its business spans worldwide, especially in Europe, the Americas, and the Asia-Pacific region. However, Heubach has faced financial difficulties in the past two years due to rising costs, inventory issues, and high interest rates. On April 22 of this year, the company filed for insolvency proceedings and sought a buyer. The acquiring company, SCIL, owns two manufacturing plants in Roha and Mahad, India, and controls 35% of the domestic market in its product category with 16 operating brands. Its sales revenue for the 2023-2024 fiscal year reached ?25.39 billion (about $303.5 million).
This strategic acquisition will create the world’s second-largest pigment company and diversify assets across 19 production facilities globally, including SCIL's two plants in India. It will also contribute to further consolidation in the global pigment market. High-performance organic pigments, due to high technical barriers, are less likely to be significantly impacted by this merger. Currently, only a few companies like China’s Seven Color Chemical and Lily Group hold key production technologies in this market. However, for classic organic pigments, capacity is becoming saturated or even excessive, and the consolidation of leading players may pressure the development of small and medium-sized enterprises.
Sale: LANXESS Exits Polyurethane Business, "Market Shock"
On October 3, German specialty chemicals company LANXESS announced the sale of its polyurethane systems business to Japan’s UBE Corporation for €460 million, with expected proceeds of around €500 million. LANXESS anticipates completing the transaction in the first half of 2025, marking its complete exit from the polymer business. The polyurethane systems division includes five manufacturing sites worldwide and application laboratories in the U.S., Europe, and China, with approximately 400 employees. As of June 2024, the division recorded sales of approximately €250 million over the past year.
This move signifies a major step in LANXESS's transformation from a traditional chemical company to a specialty chemicals manufacturer. Currently, LANXESS's business is divided into three segments: Consumer Protection, Specialty Additives, and High-Quality Intermediates. In the 2023 fiscal year, the company’s sales declined by 17% year-over-year to €6.714 billion, with EBITDA at €512 million.
Restructuring: Evonik to Reorganize Two Major Business Units for “Strategic Focus”
On October 11, German specialty chemicals giant Evonik announced a major restructuring of its coatings and adhesives resins and healthcare business units, with plans to sell or shut down operations outside its core areas. The affected businesses have total sales of approximately €350 million.
Healthcare Business
In the future, the healthcare business line will focus on lipids, drug delivery systems, and cell culture components used for mRNA and gene therapies. The pharmaceutical-grade ketone production facility located in Hanau, Germany, is set to cease production by the end of 2025, affecting approximately 260 jobs. For the facilities in Ham, France, and Wuming, China, engaged in the same business, various strategic options for collaboration or divestment are currently being evaluated.
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Coatings and Adhesives Resins Business
In the future, the coatings and adhesives resins business line will concentrate on two core growth areas: liquid polybutadiene as an additive for adhesives and sealants or tires, and specialty acrylates for the medical technology and packaging industries. The existing polyolefins business within this line (with sales of about €100 million) will be transferred to Evonik's C4 chain business, and in the future, this business will be sold as part of the C4 chain operations.
The polyester business for coatings and adhesives applications (with a turnover of €150 million) will be sold to a new buyer. This business has approximately 330 employees in Germany and China, with the largest facility located in Witten, Germany, employing about 250 staff, and a smaller facility in Shanghai with around 30 employees.
In 2023, Evonik announced plans for a comprehensive overhaul of its global structure. The first step in this strategic transformation was the sale of its large production site in Lülsdorf, Germany, to ICIG in April 2023. This year, the company has also sold its SAP business, marking the second step in its strategic transformation. The sale of its C4 chain business is expected to be the final step in this process.
Notably, in September this year, Evonik unveiled a new innovation strategy, focusing most of its R&D activities on three core growth areas: bio-based solutions, energy transition, and circular economy. This initiative aims to promote green transformation and enhance the company's focus on sustainability. Based on 2023 figures, Evonik anticipates an additional sales revenue of €1.5 billion by 2032.
Spin-Off: Honeywell Plans to Separate Advanced Materials Business and Pursue IPO
On October 8, Honeywell announced its intention to spin off its advanced materials business to shareholders, creating an independent publicly traded company in the United States. The advanced materials to be spun off include four major brands: Solstice?, Spectra?, Hydranal?, and Aclar?.
Honeywell stated that the independent company will become a leading supplier focused on specialty chemicals and sustainable materials, with projected revenues of approximately $3.8 billion and an EBITDA margin exceeding 25% for the fiscal year 2024. The spin-off is expected to be completed by the end of 2025 or early 2026. Meanwhile, Honeywell will concentrate on three key areas: automation, future aviation, and energy transition.
Transition: A.P. Moller Holding, Parent Company of Maersk, Launches Fossil-Free PE/PP Production, Betting on the Circular Economy
On September 30, Danish shipping giant A.P. Moller Holding, the parent company of Maersk, established a fossil-free plastic manufacturing company named Vioneo. The company aims to produce 300,000 tons of fossil fuel-free polypropylene (PP) and polyethylene (PE) annually, using green methanol as a raw material. The plant is set to invest €1.5 billion to establish its first production facility in Antwerp, Belgium. Front-end engineering design (FEED) is expected to begin in the fourth quarter of 2024, with a final investment decision (FID) anticipated in 2025, and commercial operations are projected to start in 2028.
Vioneo's goal is to become the world’s first large-scale producer of fossil-free plastics based on green methanol, aiming to lead the decarbonization of the €50 trillion global chemicals and materials industry, while ensuring that Europe remains at the forefront of this transformation. Vioneo has indicated that it is in deep discussions with several major global brands across various sectors, including healthcare, automotive, fast-moving consumer goods, beauty, and home products, regarding long-term purchasing agreements.