Deutsche Bank: Chemicals Industry On Doorstep Of M&A 'Bonanza'

In a new report, Deutsche Bank analyst Tim Jones discussed the firm’s recent week-long series of meetings with leading U.S. and European chemical companies in Houston. According to Jones, the chemical landscape is ripe for more M&A deals.

“In almost every meeting M&A was a key theme – we remain of the view that we are at the start of a North American M&A bonanza,” Jones explained.

He mentioned several drivers of this bonanza, including strong balance sheets, cheap financing and activist pressures. Jones expects that Europe will be more active in making U.S. acquisitions in coming months.

Catalysts For The Chemicals Bonanza

Deutsche Bank sees the U.S. Gulf Coast region as the top global investment region looking ahead. Jones expects China to be an important area of investment as well, but he believes that the U.S. Golf Coast will be as important for investment as the entire nation of China will be.

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Despite the fact that the collapse in oil prices has flattened the cost curve, North American ethane based ethylene production still maintains a 50–60 percent cash cost advantage over European production.

Jones named Evonik, BASF and Linde as the top potential European buyers of U.S. assets.

When it comes to U.S. majors, Deutsche Bank maintains Buy ratings on Celanese Corporation (NYSE: CE), Dow Chemical Co (NYSE: DOW), E I Du Pont De Nemours And Co (NYSE: DD), Eastman Chemical Company (NYSE: EMN) and PPG Industries, Inc. (NYSE: PPG).

Disclosure: The author holds no position in the stocks mentioned.