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U.S. Transactions Drive First Quarter Deal Value in Chemicals M&A, According to PwC

| April 25, 2013

Strong Involvement from Strategic Investors Representing almost 91 Percent of Deals

China Remains Active, India Shows Projected Growth

In New York, PwC reports that U.S. transactions led M&A activity in the chemicals industry in the first quarter of 2013 by driving almost 45 percent of the total deal value as companies focused on domestic growth. In the first three months of 2013, there were six U.S. deals that were worth $50 million or more with a total value of $2.4 billion, out of a total of 22 deals worth $50 million or more valued at $5.3 billion in the first quarter.

While overall deal volume was flat year over year with 24 deals worth $50 million or more in the first quarter of 2012, deal value decreased from $13.4 billion to $5.3 billion in the first quarter of 2013. This resulted from the lack of mega deals (transactions worth more than $1 billion) in the first quarter of 2013, recording one mega deal worth $1.1 billion, compared to five mega deals totaling $9.2 billion during the same time last year.

“Chemical companies remain cautiously optimistic regarding the global economic outlook and continue to maintain healthy balance sheets. However, because of high valuations, they are taking a thoughtful approach to chemical M&A,” said A.J. Scamuffa, U.S. Chemicals Leader for PwC. “We are seeing a growing interest in the U.S. market, as new sources of energy come on-line domestically and chemical producers are seeing opportunities for growth. We believe U.S. assets are making the country an attractive option for companies looking for low cost energy and feedstocks, providing significant competitive advantage.”

Strategic investors remained active in deal making in the first quarter of 2013, representing almost 91 percent of transactions valued at $50 million or more, as companies looked to diversify their product portfolios, while there was a decline in activity by financial investors.

“Companies are increasingly utilizing stock swaps; using their shares as currency as the stock market continues to rebound,” continued Scamuffa. “In the first quarter of 2013, stock swaps accounted for almost 14 percent of transactions, an increase from 10 percent for all of 2012.”

According to the report, China continued to lead activity in the BRIC countries, as it accounted for two-thirds of deal volume in BRIC M&A activity in the first quarter of 2013 with six transactions worth more than $50 million. Developing nations like China and India show prospects for growth in M&A activity, indicating a shift from acquisitions led by advanced economies. Growth in end-user markets play a key role in chemical demand as well, and with demand in the automotive sector rising in China, and global construction spending expected to shift to developing regions, China and India show potential for growth in M&A activity.

“The deal environment in the chemicals industry remains constrained in the near-term, as potential acquirers wait for further improvements in the economy and remain cautiously optimistic,” added Scamuffa. “However, despite these economic concerns, we expect to see more activity from companies as they look for new opportunities to increase geographic reach, add to product portfolios and seek new advanced technologies.”

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