Page 179 - CW E-Magazine (2-1-2024)

Annual GpcA Forum

From L to R: Mr. Richard Sleep, Ms. Nadia Al Hajji, Mr. Tom Crotty, Mr. Paul Smith
tion happened in the big commodity the lack of a big imperative to consoli- including PVC consolidation in Europe
chemicals, there was simultaneous ex- date. “Companies have been making and the regulatory approvals for some
pansion of the market, such that there money. There was the shale gas advan- of those deals took over two years and
was no overall leader. tage that emerged in the US, while the involved fairly painful disposals along
Middle East has continued to maintain the way. So, consolidation is a chal-
Taking the example of develop- a significant advantage. There were no lenge,” he added.
ments in the polyethylene segment existential crisis causing companies to
from the 1990s to the present, he noted look to save money by consolidating or Ms. Nadia Al Hajji, CEO, PIC, noted
that the global capacity was about 19- rationalising operations. Secondly, the that if a M&A deal doesn’t make money,
mtpa with the top 10 producers own- regulatory environment has changed then there is no point looking at it. Speak-
ing less than half of the total capacity. and it has become more challenging to ing about the present M&A environment,
After a string of mergers and acquisitions undertake consolidation and integra- she highlighted the gap in expectations
(M&As) among the top 10 resulting in tion. There is also much more focus between the buyer and seller, which has
bigger entities, it did not result in mar- on the downsides and risk factors in stalled a number of deals that might have
ket consolidation as newer players, par- M&As, including the need to tackle been easier to conduct.
ticularly in Asia and the Middle East, carbon emissions & sustainability is-
added more new capacities such that sues or structurally disadvantaged as- Later, quoting a recent survey on
the overall market share of the top 10 sets,” he explained. M&As by Accenture, Mr. Sleep said
remained below 50% and it continues investor exit is one of the key drivers
to be below 50%. Mr. Smith pointed out that this for sellers’ motivation, followed by
conservative approach is driven by the synergy, portfolio optimisation, and
Mr. Paul Smith, Global Head of guidance of investors, who seek more effect on share price, whereas divesting
Chemicals, Citi, noted that even as the focus and don’t want to deal with large underperforming assets was a relatively
petrochemicals industry has not seen problems that require significant capi- low priority reason.
consolidation in the last 20 years, there tal. “This is driving the industry lead-
has been massive consolidation in other ers to focus more on organic growth in Mr. Smith pointed out that over
sub-sectors of the chemical industry, today’s market rather than M&As”, he the last 18 months, of all the deals Citi
including industrial gases and agri- said. worked on proactively, only about 30%
chemicals, where the market went from were transacted and 70% ended with
six or seven big players to three or four. Mr. Tom Crotty, Group Director, no deal. “We are in an environment
Ineos, agreed on the regulatory hurdles where there are evident challenges like
Commenting on the likely reasons faced by companies while undertaking destocking, high interest rates, and an
for similar consolidation not happen- consolidation deals. “Ineos has been uncertain economic outlook, and that’s
ing in the petrochemicals industry in involved in several deals, at the pro- made it difficult for buyers and sellers
the last decade, Mr. Smith underlined duct level, centred around consolidation, to meet,” he observed.

Chemical Weekly January 2, 2024 179

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