Restructuring in the pine chemicals market continues

Early this year, I wrote a special report on the ongoing restructuring within the global pine chemicals industry (yes, it is free to access) and I guess one of the biggest transactions to date (if not the biggest in the pine chemicals market) is this recent announcement on the acquisition of Kraton Corporation by South Korea-based petrochemical company DL Chemical Co. Ltd. for around $2.5 billion. In 2015, Kraton acquired Arizona Chemical Holdings in a $1.37 billion deal.

DL Chemical,  a subsidiary of DL Holdings  Co. (formerly known as Daelim Industrial Co. Ltd), will acquire 100%  of  Kraton in an all-cash transaction. The sales valuation reportedly represents an attractive premium of 50% over  Kraton’s unaffected market valuation as of early July.  DL Chemical also acquired Kraton’s Cariflex business last year for $530 million. Cariflex produces specialty isoprene synthetic rubber and latex used for medical materials such as surgical gloves and rubber stoppers.

According to DL Chemical, it has been highly interested in Kraton’s specialty polymer and bio-based chemical business.  Kraton’s pine-based specialty products are sold into adhesive, road and construction and tire markets, and it produces and sells a broad range of performance chemicals into markets that include fuel additives, oilfield chemicals, coatings, metalworking fluids and lubricants, inks and mining. More analysis about Kraton will be reported on Tecnon OrbiChem’s October Bio-Materials report.

DL Chemical claims to be the world’s largest producer of polybutene with a production capacity of 200 ktpa, reportedly accounting for 23% of the global polybutene market as of 2020. Polybutene is a raw material of lubricants, adhesives and electrical insulators. To finance this acquisition, DL Chemical will use its cash reserves of $1bn and raise the remainder through loans backed by Kraton assets. Kraton will become the remaining entity of DL Chemical’s US operations and be delisted from the New York Stock Exchange.

More information about DL Chemical and the company’s mid/long term development strategy including the company’s development of eco-friendly materials, research on biomass application, biodegradable materials and waste plastic recycling will also be discussed on next month’s Bio-Materials reporting (subscription-based).

The acquisition is expected to close by the end of the first half of 2022.