Chemicals Q MERGER & ACQUISITION ACTIVITY CONTACTS

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1 CONTACTS David Bench Managing Director, Head of Industrials Practice (949) Tracy Patch Vice President (949) Christopher Cardinale Associate (949) Peter Asiaf Managing Director, Head of Business Development (617) MERGER & ACQUISITION ACTIVITY Merger & acquisition (M&A) activity in the chemicals sector has been very robust, as compared to other industries, with respect to both deal volume and total deal value. The Chemical sector is currently experiencing an M&A boom that is anticipated to continue through 2017 and into Deal volume was at record levels in 2016, both globally and in the US. Based on publically disclosed data for 2016, there were 650 deals completed globally and 216 in the US. Both data points are historic records, topping the previous record year in Total global deal value was staggering in 2016 at $231 billion, compared to just $77 billion in Large transactions among major players, such as Bayer s $66 billion acquisition of Monsanto, buoyed deal value. Some sub-segments of the chemical sector are experiencing more significant M&A activity. Commodity chemical companies were very active in 2016, including Westlake s $3.8 billion acquisition of Axiall Corporation. It is anticipated that commodity chemicals will continue to experience high M&A activity in an effort to combat subpar organic growth. Regulatory and antitrust procedures have also played a major role in deal activity. Many mega deals, such as Dow s acquisition of DuPont, have experienced road blocks from governments. Although expected to close in August 2017, DuPont has been required to sell off assets and product lines in order to satisfy global governments. Capstone anticipates that M&A activity in the Chemical Industry will continue its high for the foreseeable future, well into 2018, barring any global geopolitical events. Nearly all chemical companies canvassed are instituting an aggressive strategy towards M&A and other inorganic growth initiatives. M&A Transactions: Chemicals BOSTON CHICAGO LONDON LOS ANGELES NEW YORK ORANGE COUNTY PHILADELPHIA SAN DIEGO SILICON VALLEY TAMPA Number of Transactions US Global Sources: Capital IQ and Capstone Partners LLC Research

2 KEY TRENDS & DRIVERS There are a number of trends and drivers that have had significant impact on recent chemical deal activity. Capstone has identified a few of these key factors and has outlined them below. Slow Growth Lackluster global growth in the Chemical Industry relative to global GDP has resulted in companies utilizing M&A as a key growth initiative. Major European players are actively looking at the US as a key target for acquisitions. Core Product Focus Chemical companies are strengthening their positions within core markets through the buying and selling of product lines, which has contributed to the flurry of M&A activity. Private Equity Investment community involvement in the Chemical Industry, including activist investing, has increased since the recession, which has put upward pressure on valuation multiples. Moreover, private equity funded companies are more active in M&A, which has led to an increase in strategic buyers on the hunt for tuck-in acquisitions. Mega Deals 2016 was the year of mega deals, as the total value was significantly higher than previous years. Although Capstone does not expect 2017 to reach 2016 levels, deal value is still anticipated to be high relative to historical numbers, as major chemical companies continue to make major acquisitions. Total Disclosed Deal Value $250 $ Billions of US Dollars $200 $150 $100 $50 $55.60 $55.10 $41.80 $31.80 $77.80 $ $ $ Projected 2017 Sources: Capital IQ, Deloitte, Capstone Partners LLC Research Capstone Partners LLC 2

3 CHEMICALS: SELECT M&A TRANSACTIONS Enterprise EV / LTM Ann. Date Target Acquirer Target Business Description Value (mm) Revenue EBITDA 06/06/17 PexCor Manufacturing Mueller Industries Manufactures polyethylene-based products for the plumbing industry. 06/06/17 SIPH Campagnie Financiere Michelin Produces and markets natural rubber for tire products. $ x 17.4x 06/01/17 D.B. Western SK Capital 06/01/17 Tri-Tex co SK Capital Manufactures formaldehyde and its derivatives, operating the largest merchant plant of its kind. Manufactures dyes and pigments for use in a variety of industries. CF CF CF 05/31/17 DuPont, Copper Fungicide Koicde Comprises the company's copper-based fungicide manufacturing business. 05/30/17 Saboo Coatings Pvt. Berger Paints India Produces coatings, lacquers and paints in India. $ x - 05/30/17 Flextech Ginegar Plastic Products Develops film product chemicals for the industrial sector. $ /26/17 PPG Industries, Fiber Glass Nippon Electric Glass Americ Comprises the licenses and assets of the company's fiberglass reinforcement business. $ x 10.6x 05/25/17 Metamark UK Primary Capital 05/22/17 Huntsman Clariant Manufactures and distributes self-adhesive vinyl and other specialty materials for cutting and printing. Manufactures and sells organic and inorganics, including performance products and advanced materials. $ x - $10, x 9.6x 05/16/17 BioBased Technologies Cargill Develops and markets bio-based polyols for a variety of industries. 05/10/17 Soda Aromatic Mitsui & Co. 05/01/17 IFS Chemicals Huntsman Produces and sells fragrances, flavors, aroma chemicals and industrial chemicals. Manufactures polyurethane foam insulation resins and elastomers. $ x 5.2x 04/27/17 Shanghai SECCO Petrochemical Sinopec Manufactures petrochemical products, including ethylene, propylene and benzene. $3, x - 04/26/17 Drew Marine s Wihelmsen Ships Technical Solutions Service Manufactures cleaners, dispersants, rust removers, coatings and other chemical products for ships. $ /20/17 Puritan Products Avantor Performance Materials Manufactures specialty chemicals such as acetic acid, acetone, chloride and fluoride. 04/17/17 Williams Olefins NOVA Chemicals Produces, distributes and stores polymer grade ethylene and propylene. $2, /12/17 Division of The Valspar Corp. Axalta Coating Comprises the industrial wood coating manufacturing operations. $ x - 04/05/17 Houghton International Quaker Chemical Develops and manufactures specialty chemicals, oils and lubricants for a variety of industries. $1, x 12.3x 04/03/17 Valley Processing Hexpol Provides formula-to-dock compounding and support services for mixed rubber and other specialty materials. $ x - 03/31/17 Trelleborg Material & Mixing Lesina Hexpol Manufactures rubber-based raw materials used in the rubber industry. $ x - 03/02/17 Grace Darex Packaging Henkel Manufactures sealants and coatings for cans and closures of packaged food and beverage products. $1, x - 03/01/17 Yingde Gases PAG Asia Produces, supplies and distributes industrial gas products in China. $2, x 7.3x 02/24/17 Daesung Industrial Gases Co. MBL Sells industrial gases, such as oxygen, argon and hydrogen in South Korea. $ x 8.5x 02/10/17 SummitReheis Elementis Manufactures antiperspirant chemicals used in consumer products. $ Capstone Partners LLC 3

4 CAPSTONE PARTNERS: A SAMPLING OF COMPLETED CHEMICALS TRANSACTIONS Capstone Partners maintains an active Industrial & Manufacturing practice in the middle market, with Chemicals being an important vertical within our focus. This market presence allows Capstone to provide chemical companies with experienced, up-to-date market data and access to key decision makers among the industry s most active acquirers and investors. CAPSTONE PARTNERS ADVISES D.B. WESTERN, INC. TEXAS In June 2017, Capstone announced that is has successfully advised D.B. Western, Inc. Texas (DBWT) on its acquisition by SK Capital Partners. DBWT is a leading producer of formaldehyde, urea-formaldehyde concentrates and MEA Triazines utilizing the most advanced technology in the industry from its LaPorte, Texas facility, the largest merchant market plant in North America. D.B. Western - Texas Steve Beetham, representing the selling shareholders, commented on the transaction stating that, We were extremely pleased with Capstone Partners who represented us in this complex sale process, and optimized all aspects of the transaction for our family. Capstone Partners LLC 4

5 THE CHEMICALS TEAM David Bench, Managing Director, Head of Industrial Practice David is a Managing Director in charge of the Western Region, based out of Orange County. Prior to Capstone, David managed the Western region for Morgan Stanley Smith Barney s Capital Strategies Group and its predecessor, Citi Capital Strategies. David has focused on middle market investment banking within the industrials and manufacturing sectors for nearly 30 years and has been the lead banker in over 250 total M&A transactions involving both domestic and foreign corporate buyers, as well as leveraged recaps with private equity sponsors. David s achievements in the investment banking industry have gained national recognition by The M&A Advisor: one of his transactions was awarded the Energy Deal of the Year and he was awarded Middle Market Financing Professional of the Year. Mr. Bench holds a BS and an MBA in Finance from Brigham Young University. He is a Series 7 and 63 Registered Securities Representative and a Series 24 Registered Securities Principal. Tracy Patch, Vice President tpatch@capstonellc.com Tracy is a Vice President in the Orange County office, supporting the management of the Western Region. Prior to Capstone, Tracy worked as a senior banking professional in Morgan Stanley Smith Barney s Capital Strategies Group and its predecessor, Citi Capital Strategies. She possesses over 10 years of experience in middle market investment banking, working on both domestic and cross-border transactions. Her previous finance experience includes working in the hedge fund industry with Collins/Bay Island Securities LLC and Talisman Capital Partners. Prior to that, Mrs. Patch worked with institutional fixed income sales at both Vining Sparks IBG, LP and Robert Thomas Securities, Inc. Tracy also enjoyed tenure in management at The Disney Company. Mrs. Patch holds an MBA from Pepperdine University and a BS in Finance from Miami University of Ohio. She is a Series 7 and 63 Registered Securities Representative. Christopher Cardinale, Associate ccardinale@capstonellc.com Christopher is an Associate in the Orange County office. He supports management and clients in the Western Region. Christopher is engaged in the execution and advisory of mergers, acquisitions and strategic capital raises. Prior to joining Capstone, he was an associate with a boutique M&A firm focused on valuation, M&A advisory, corporate finance, acquisition target research and exitplanning strategy. His industry experience includes manufacturing, healthcare, TMT and consumer. Christopher was also a research analyst in the M&A department at United Capital Financial Advisors. He earned a BA from the University of San Diego. Christopher is a Registered Securities Representative having passed the FINRA Series 79 and 63 examinations. Capstone Partners LLC 5

6 CAPSTONE S OFFICE LOCATIONS BOSTON 176 Federal Street 3rd Floor Boston, MA (617) CHICAGO 200 South Wacker Drive Suite 3100 Chicago, IL (312) LONDON 42 Brook Street London W1K 5DB United Kingdom +44 (0) LOS ANGELES 401 Wilshire Suite 1200 Santa Monica, CA (858) NEW YORK 340 Madison Avenue 10 th Floor New York, NY (212) ORANGE COUNTY Avenida de la Carlota Suite 600 Laguna Hills, CA (949) PHILADELPHIA 1515 Market Street 12th Floor Philadelphia, PA (215) SAN DIEGO High Bluff Drive Suite 200 San Diego, CA (858) SILICON VALLEY 228 Hamilton Avenue 3rd Floor Palo Alto, CA (650) TAMPA 1550 W Cleveland Street Suite 10 Tampa, FL (813) ABOUT CAPSTONE PARTNERS Capstone Partners LLC is an award-winning investment banking firm dedicated to serving the corporate finance needs of middle market business owners, investors and creditors. Over the past 15 years, Capstone has earned a reputation as one of the most innovative firms in the industry, offering corporate sale & divestiture, merger & acquisition, private placement, corporate restructuring, valuation and financial advisory services. The firm maintains seven industry practices, including: Business Services, Consumer Products, Education & Training, Government Services, Health & Medical, Industrial & Manufacturing, and Technology & Telecom. Headquartered in Boston, Capstone has offices in Chicago, London, Los Angeles, New York, Orange County, Philadelphia, San Diego, Silicon Valley and Tampa with an international presence that spans 450+ professionals in 70 offices across 31 countries. For more information about our expertise, please visit World Class Wall Street Expertise. Built for the Middle Market Capstone Partners LLC. All rights reserved.