What will happen when the music finally stops?
15 Jan 2000
To judge by our news pages this month, you might think that the process industries and their suppliers are all playing a gigantic game of musical chairs at the moment.
On page 5, for example, we report on the closing stages of the £1billion-plus battle for ownership of UK speciality chemicals company Allied Colloids, and on the likely merger between SmithKline Beecham and American Home Products that could create the world's largest pharmaceuticals company worth over $80billion. Also on that page is news of BP Chemicals' acquisition of Huls' subsidiary Styrenix Kunststoffe and of a possible tie-up between Huls itself and Degussa.
Turn over and the music plays on. On page 7 we report on the final EC approval for the merger of BASF's and Shell's polyethylene businesses; and the completion of ICI's sale of its polyester polymer businesses to DuPont for a trifling £800 million.
As far as the UK is concerned, it could be argued that in 1993 ICI was the first to strike up the mergers and acquisition band. At that time, though, ICI was not merging with anyone, but splitting itself into what is today's ICI and Zeneca. And as we have been reporting recently, today's and tomorrow's ICI is radically different from the 1993 version.
Even then, of course, ICI's demerger was merely continuing a restructuring plan that was already well under way. Early that year, for example, ICI had agreed with BASF to swap their respective polypropylene and acrylics businesses. Since then the pace of change has accelerated so much that ICI has managed to transform itself almost completely from a bulk commodity chemicals company to one focused on the speciality chemicals and paints markets.
As this month's other news shows, ICI is by no means unique in this respect. To compete on the world stage, traditional chemical companies irrespective of their size are having to concentrate on core businesses, often in partnership with previously competitive companies.
And now this 'merger mania' is taking a grip of the process equipment industry as well. Last year saw the likes of US Filter and Black & Veatch consolidate their respective European operations in filtration and water and waste treatment by acquiring previously competitive companies. And this year the same tune is being played as Tyco and Keystone (see page 28) harmonise their merger of a few months ago, John Crane expands its US mechanical seal presence by buying Sealol, and Sundstrand pumps up the volume in the sealless fluids handling market by acquiring Ansimag (see page 10).
So far so good for all concerned. But perhaps all these corporate players should remember that every round of musical chairs has a loser and, when the music finally stops, there can only be one winner.
