Chemical plants consolidating
"So in this regard, it is a great thing for the industry and for the country in the long run," he said."News of tougher regulations pushed up share prices of major chemical companies, as investors bet that closures of smaller companies will boost operations of those at larger scale.
Trading of shares of more than 50 companies was suspended on Monday after gaining the daily limit of 10 percent.
Finally, we believe Axalta is a unique coatings company that generates industry-leading margins and returns.
And while it could be an attractive acquisition target, we own Axalta because it trades at a discount to what we believe the business is worth on a standalone basis. (PX) has signed a definitive agreement to merge with German company Linde AG in a billion transaction expected to close in late 2018, which will create the largest industrial gas supplier in the world.
Photo: ICChina's chemical industry is expected to face tough regulation from both central and local governments that will likely lead to closures of many small plants and prompt consolidation within the industry, after a pair of deadly explosions at chemical plants last month.
Authorities have moved swiftly in recent days to take remedial measures aimed at eliminating safety risks, including special safety inspections and the closure of some companies and even entire industrial parks.
Dense smoke rises from the plant of Jiangsu Tianjiayi Chemical Co on March 22 after an explosion in Xiangshui County, Yancheng city, East China's Jiangsu Province.
The Jiangsu provincial government plans to shut down as many as 30 industrial parks that house chemical plants and close thousands of companies, according to media reports.
Jiangsu is one of the largest bases for chemical industries in China.
Thus, these firms sought greater certainty of earnings growth by combining with other large chemical firms and aiming to extract significant potential cost savings (on average 3-4% of combined revenues).
In the case of Dow and Du Pont, activist shareholders of both companies advocated for aggressive cost reductions and portfolio optimization/rationalization, which resulted in the combination of the two companies (which will subsequently be broken up into at least three businesses, as discussed further below).