From Beyond BRICs:
The completion this week of an €830m acquisition by Russia’s Eurochem of the Dutch fertiliser operations of BASF, the German chemicals combine, highlights the growing interest of EM companies in buying assets in the developed world.
Even though it coincides with developed-world chemicals groups making acquisitions in EMs, there is a clear logic to these deals: access to technology and markets and the establishment of closer links with developed-world regulators. As Fitch, the credit ratings agency, says, there are more such transactions in the pipeline.
Fitch said in a note on Wednesday it saw “chemical assets in mature markets attracting increasing interest from emerging market (EM) producers, mirroring Western European producers’ ongoing expansion drive into high growth markets.”
Myriam Affri, a director in Fitch’s industrial team, told beyondbrics: “Emerging-market companies are moving downstream and looking to increase their technological content. we are going to see an acceleration in the move towards international markets.”
Recent acquisitions follow on the heels of many joint ventures, for example those involving China’s Sinochem and Sinopec, and Indian state-run enterprises such as the Indian Farmers Fertilizer Cooperative and Southern Petro-chemicals Industries Corporation.
As the Eurochem deal shows, Russian fertiliser companies are looking abroad after a period of intense consolidation at home which saw the creation of big groups, headed by Uralkali.
Eurochem is controlled by billionaire Andrei Melnichenko who also owns almost 10 per cent of K+S, a German salt and fertiliser producer and former BASF subsidiary.
Fitch lists other important deals and near-deals headed by the failed $12bn bid in 2009 by India’s Reliance Industries for Dutch-based LlyondellBasell (2009).
Successful transactions include Abu Dhabi-based International Petroleum Investment Company’s $2.3bn acquisition of US-based Nova Chemicals Corporation in 2009; China Bluestar Group’s $2.2bn acquisition of Norway’s Elkem (2011); and Thailand-based Indorama’s $795m acquisition of US-based Old World Industries (2012).
Sinochem last year withdrew a $2.3bn bid for Australia’s Nufarm.
Fitch says leading EM chemicals producers are hungry for international action as they complete costly multi-year domestic investment programmes.
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