The LNG sector has often acted like a mover of molecules, arbitraging low value gas to high value markets with oil-linked pricing. Increasingly, there is a need to focus on broader competitiveness within the value chain. The imperative is not only for asset operations and project developments to improve cost competitiveness, but also in extending positions to include downstream customer value. This requires reorienting and reskilling to focus on customer centric competitiveness backed by world-class operational efficiency.
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Three landmark deals in agrochemicals, specialties and commodities have overshadowed other transactions for 2016:
The shareholders of Monsanto Co. agreed to move forward on a USD66 billion acquisition by Bayer AG.1 If approved, the acquisition would result in a company with a quarter of the world market for seeds and pesticides.2
The merger of Dow Chemical Co. and E. I. du Pont de Nemours and Co. represents a combined market capitalization of around USD130 billion, with leading positions in agrochemicals and seeds, material sciences and specialty polyolefins used in packaging and adhesives.3
China National Chemical Corp is in the process of acquiring Syngenta AG of Switzerland. The USD43 billion acquisition recently won approval from the Committee on Foreign Investment in the United States (CFIUS). The deal would be China's largest overseas acquisition to date.4
This year presents a number of possible disruptors for the global chemical industry.
Oil and gas prices: It’s anybody’s guess where the price of crude and natural gas will be a year from now or even six months down the road. Future developments will affect virtually the entire chemical industry, either directly or indirectly.
Trump: As a businessman, he has presented his policies as economically friendly and expansionary. He has promised to slash corporate taxes, roll back environmental regulations, and loosen restrictions on investment. On the other hand, concerns are raised about his opposition to international trade agreements and the possibility of major tariffs that might trigger trade wars.
Brexit and the EU: In parallel with the new Trump administration, Brexit and a possible realignment of the European Union will also possibly become major disruptors for the global chemical industry. This development might discourage deals across national borders within the EU.
Digitalization: Data, analytics and innovations in manufacturing, sales and customer relations will continue to encourage the acquisitions of technology companies by large chemical players.
Overall, however, factors that supported a healthy M&A market in 2016 should remain in place for 2017.
Mary Hemmingsen, Global LNG Leader, KMPG in Canada
Jeremy Kay, Global Strategy Leader, ENR, KPMG in the UK
Christopher Young, Director, Oil & Gas Strategy, KPMG in the UK
1Bayer clinches Monsanto with improved $66 billion bid, Reuters, 15 September 2016.
3KPMG Deal Capsule January 2017.
4ChemChina-Syngenta $43 Billion Deal Approved by U.S. Security, Wall Street Journal, 22 August 2016.
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Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.