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Chemicals group acquires Deuchem

by Rachel Robson

Specialty chemicals group Elementis has significantly expanded its presence in Asia through agreeing to acquire Taiwan-based Deuchem for £40.4 million in cash.

Deuchem supplies additives and resins to the coating and related industries and has three sales offices in Taiwan and 11 in China. It also has manufacturing and technical facilities near Taipei and in Shanghai. The deal will provide Elementis with a platform for its Specialty Products Division to speed up growth in Asia.

Additional growth in the combined businesses will be driven by the sale of Deuchem’s product portfolio to the Elementis global customer base, along with the opportunity to sell Elementis products through Deuchem.

Due to be completed during the second half of the year, the acquisition is expected to be earnings enhancing for Elementis in the first full year of ownership.

ABN Amro’s Richard Rae describes the deal as ‘sensible’, saying that it looks to make sense on a stand-alone basis, ‘but the big opportunity is cross-selling Elementis’ specialty products to Deuchem’s customers which should also improve margins through mix effects.’ He adds, ‘The shares are trading at 9.6 times FY08 with better geographical spread and a still very strong balance sheet. This is still materially below peers and this deal represents a step-change in Elementis’ access to one of the largest and fast-growing markets in the world.’

Shares says: An acquisition which holds great potential for growth in Asia.