Reliance Bid For LyondellBasell To Kick-Start M&A Activity

Now that both Reliance Industries and LyondellBasell have confirmed that an offer has been made for the world's 4th largest chemical company, we can anticipate a significant increase in M&A activity in the chemical industry.

Some industry analysts believe that the reported price, of somewhere between $10M - $12M, is relatively low, given LyondellBasell's recently published EBITDA results and could initiate a bidding war involving a number of prospective suitors.

The news follows hot on the heels of the various reports that IPIC is in talks with as many as 5 potential targets, including Bayer MaterialScience and other companies possessing technologies technologies which would support the development of the ChemaWEyaat project in Abu Dhabi.

There have also been reports that Dow Chemical has been in talks regarding the sale of a number of assets, as well as reports that Sinopec was looking at a number of potential targets in Europe. I've also heard several suggestions that a number of the Middle East majors will be looking to complete further acquisitions in 2010.

It looks certain that 2010 will be a major year of change in the sector, with the emergence of some new superpowers in the industry and further consequent changes to the asset footprint. Time for the site people to start changing the signposts and the letterheads once again!

Top 100 Feedback

I've had some interesting feedback on the recent top 100 posting, regarding which companies are likely to dominate in the future. Three main themes are emerging.

Companies that are integrated through the entire petrochemical value chain through to commodity polymers/chemicals have a far greater chance of making it to the top 10. This means that the likes of ChemaWEyaat, SATORP and Borouge could join the 'top table'.

Companies with excellent product & application innovation can also be strong. The model followed by DuPont is a good example of this.

Finally, major players could emerge from oil and gas rich states (Russia and Venezuela are good examples), where feedstock is plentiful and cheaper, so further large, integrated facilities could develop.

Whatever the theme, the absolute key to success is to have a clear strategy, backed up by excellent implementation.

Top 10 Chemical Companies in 2008 and in 1998

ICIS has recently published its fascinating analysis of the top 100 chemical companies in 2008 (ranked by sales). The names in the list will not be a surprise to many; BASF, ExxonMobil, Dow Chemical, LyondellBasell, Du Pont and Shell figure prominently in the list.

What is more interesting is to look back to the top 10 in 1998 and look at the differences. BASF, Dow and Du Pont were all present but other names have disappeared completely; ICI, Hoechst and Rhone Poulenc were very big 1998.

New additions to the top 10 are the likes of SABIC, Sinopec, LyondellBasell and Ineos, with SABIC and Sinopec growing very quickly in recent years. LyondellBasell and Ineos are, of course, new companies formed in recent years and which have grown through successions of acquisitions.

The brave amongst us might like to try and predict what 2018 might look like. New names like Borouge and ChemaWEyaat may well appear, with some European and North American companies coming under some pressure?