Chemical Reactions is a bulletin from Alasdair Nisbet, Chief Executive of Natrium Capital, providing expert insight into current market developments and M&A trends in our specialist sectors: chemicals, specialty and fine chemicals, engineering materials, paints, inks, coatings and adhesives, sustainable technologies (cleantech) and biotechnology. Recent topics range from world affairs to sustainability trends, environmental issues and the circular economy.
Exploring the important role chemistry plays at the Olympic and Paralympic Games
The Olympic and Paralympic Games are the most recognised multi-sport events globally, attracting viewers from across the world as the finest athletes face each other for the chance of ultimate sporting glory every four years. The pinnacle of elite sport is always rising, and Olympic and Paralympic athletes put themselves through gruelling training regimes and regimented diets to keep themselves at the forefront of athletic performance.
But these days you could not win gold without having the right chemistry in your equipment and clothing.
Read more…
The European Carbon Border Adjustment Mechanism and its Effect on the EU’s Chemical Industry
Many European chemical companies are facing a significant capital investment to meet the drive by the European Union (“EU”) to carbon neutrality. Companies are closing plants rather than investing, particularly in Germany, as a response to their lack of “carbon competitiveness”. The Carbon Border Adjustment Mechanism (“CBAM”) will help to tackle carbon price policy asymmetries and safeguard industrial investments from being undercut by the importing of cheaper, ‘dirtier’ non-EU products.
Sustainable Aviation Fuel
The aviation sector’s long-standing reliance on fossil fuels to power their aircraft has long raised environmental concerns, and curbing its emissions to align with the global push for net-zero has become the major challenge of the industry. The need to scale-up and adopt sustainable alternatives is paramount yet difficult.
The Challenge of Bio-Plastics
Polyethylene terephthalate (“PET”) has become the most used plastic for bottles, semi-rigid containers, and fibres. PET, produced from purified terephthalic acid (“PTA”) and monoethylene glycol (“MEG”), can be replaced by bio-based alternatives, including polyethylene furanoate (“PEF”) which has bio-based constituents. PEF provides superior barrier properties in comparison to PET and a net-zero generation of CO2 when recycled.
Lithium Battery Recycling
The development of lithium-ion batteries (“LIB”) for electric vehicles and energy storage systems has led to a clean energy revolution. A challenge posed, however, by the wide spread adoption is ensuring the recycling technology for end-of-life LIB is keeping pace.
Reduce, reuse, recycle… and invest
Textile production, sale and usage are a part of a global industry employing millions of workers and benefitting consumers all around the world. It is also considered one of the most environmentally hazardous industries, responsible for 8% of the global carbon footprint, similar to that of all the EU.
Powering the Future
The substantial rise in sales of electric vehicles (EVs) due to changing consumer views, new regulations and environmental concerns will drive the continued demand for raw metals, specifically lithium and cobalt. Supply constraints, environmental and human rights concerns over their extraction and new end-of-life policies are making battery recycling an increasingly important material source.
The Road to Net Zero
Natrium Capital has looked at the pros, cons and main uses / applications of the significant fuel types which will form the transition to renewable energy. This edition of Chemical Reactions provides an overview of fuel types on the subsequent pages.
New legislation pushing for a circular and climate neutral economy in the EU
The European Commission (“EC”) is proposing to modernise EU Legislation on batteries and to deliver the first initiative announced in the new Circular Economy Action Plan. The proposal is another step towards achieving the goals of the European Green Deal and contributing to the zero-pollution ambition set in it. By 2050, sustainable batteries are vital for green transport, clean energy and for achieving climate neutrality. The proposal addresses the social, economic and environmental issues related to all types of batteries.
New Legislation will Accelerate Change and Consolidation in the Chemical Industry
On Wednesday 14th October, the European Commission adopted a new strategy for sustainability within the Chemicals industry. This follows an announcement by the European Commission earlier this month outlining a roadmap towards “a Zero Pollution Ambition for air, water and soil – building a Healthier Planet for Healthier People” – a key pillar of the European Green Deal, which commits Europe to no net emissions of greenhouse gases by 2050 and decoupling economic growth from resource use.
#PassOnPlastic – How should the Plastics industry respond?
When the winner of the Tour de France has #PassOnPlastic emblazoned on his kit, it is clear that the problem of waste plastics is now part of public debate. In David Attenborough’s Blue Planet 2, the image of plastic bags floating in the ocean and his chilling statement that “the future of all life now depends on us” has helped to change the global narrative on plastic pollution.
Zero-emission vehicles becoming mainstream
The revelation of “Dieselgate” in September 2015 has contributed to a major shift in public opinion against diesel engines and, more broadly, the Internal Combustion Engine (“ICE”). Calls for more drastic measures to clean the air of large cities, coupled with strict CO2 targets set by the Kyoto protocol, has led to a renewed impetus for a switch to Alternative Power Vehicles (“APV”). The growing availability of viable electric technology and innovative designs is having a disruptive effect on the automotive industry and its supply chain, including chemicals.
Opportunity or threat?
With efforts to advance the Belt and Road Initiative (BRI), China is moving economic globalization forward with concrete actions. China’s economy is transforming from a phase of rapid growth to one of high-development (laying down infrastructure to support its growth). The resulting middle-income population is the largest in the world and the BRI provides the chemical industry with an opportunity to service these 400 million people with their increased demand for manufacturing related to higher-quality consumption, energy-efficient buildings, smart transportation, new energy and many other green and low-carbon industries in new cities.
Exploring uncharted waters
The negotiations for Britain’s departure from the European Union will begin in March with notification under Article 50 of the Lisbon Treaty. Along with death and taxes another certainty is that the UK will now leave the EU. The question is what will be the nature of the UK’s relationship with Europe. We consider the impending Brexit negotiations from the perspective of M&A bankers and give our analysis of the challenges.
Time to re-think WACC?
In the last few months there have been a number of acquisitions announced at 15x EBITDA. This multiple was last paid for a chemical business in the heady days of the fine chemical consolidation in 1999/2000. Does this mean that we are at the peak of valuations or is this the “New Normal”? The simple answer is possibly the latter. At that time, there was a scarcity of strategic assets that drove up acquisition prices and this is happening again. But there are two big differences: borrowing costs are now much lower and stock market valuations are higher.
New trend to bundle seeds businesses with chemicals
When Monsanto was rebuffed by Syngenta it was only a matter of time before it too received a bid. Its single product chemical business could fit with most players and its seed portfolio is attractive to all with enough cash. The leading competitors are modifying their strategy “Focus” to “Bundling”, bringing plant biotech, traditional agrochemical (“Ag”) companies and generics. The merger of Dow and DuPont, the takeover of Syngenta by ChemChina and the combination of UPL and Advanta reinforce the trend.
