The 11th of April Solvay announced its intention to buy Rhodia for €3 billion. This is the last announcement in a long list of acquisitions in the chemical industry in a year that is breaking records. The number of acquisitions is motivated by a market recovering from the economic crisis and that has cash again after 3 years of strong readjustment measures.
Solvay buys Rhodia
The main products of Brussels based Solvay are sodium carbonate, hydrogen peroxide and specialty polymers. It employs 16,800 people in over 40 countries and in 2010 its consolidated sales were €7.1 billion. The sale of its pharma business for €4.5 billion to Abbott was finalised. This sale focused the rest of the business in the chemicals sector and it has probably facilitated Rhodia’s acquisition. Rhodia employs 14,000 people worldwide and in 2010 its sales amounted to €5.23 billion. Its internal structure is a bit complicated, with 5 clusters and 11 business units. The main products of Solvay and Rhodia are summarised in the table below:
|Advanced materials||Diphenols and derivatives|
|Barium and Strontium products||Engineering plastics|
|Calcium Chloride||Fluorinated compounds|
|Caustic soda||Phosphorous derivatives|
|Chlorinated products||Polyamide intermediates|
|Fluor products||Polyamide fibres|
|Magnesium products||Silica precipitate|
|Peroxides||Rare earths, aluminas y oxides|
|Polyglycerols||Salicylic and derivatives|
|Precipitated calcium carbonate PCC||Solvents|
|Sodium bicarbonate||Specialty polymers and monomers|
|Soda Ash||Sulphuric acid and services|
|Specialty polymers (see figure above)||Surfactants|
In the friendly buyout agreement, both companies consider that the resulting group will have sales of approximately €12 billion, of which 40% will be in emerging economies. To this respect, Solvay has a strong presence in China, while Rhodia is more active in Russia and Thailand. This will favour growth of the resulting company in these regions.
A year with plenty of acquisitions
But the acquisition of Rhodia by Solvay is not the only one we have seen this year. Bloomberg has calculated the overall value of deals in the chemical industry during 2011 to be $25 billion, the greatest of the decade. The average price tag of deals has been $720 millions. Many analysts believe that the boom in deals has not yet finished and that more chemical companies have the required cash to acquire other players. Some of the acquisitions taken place this year are listed below:
|Announced April 2011||Solvay||Rhodia||€3 billion|
|December 2011||BASF||Cognis||$4.3 billion|
|Announced February 2011||Clariant||Süd Chemie||€2 billion|
|February 2011||DSM||Market Biosciences||€790 millions|
|March 2011||Berkshire Hathaway Inc||Lubrizol Corp||$9.2 billion|
Acquisitions are usually motivated by one of the following reasons:
- Widen existing portfolio, incorporating added value products if possible. Products derived from renewable sources are very coveted nowadays, together with companies producing nutraceuticals or ingredients.
- Increase geographic coverage in a fast and efficient way.
- Enter new markets, creating synergies with existing products.