Freedonia Analyst Weighs in on Evonik's Purchase of JM Huber's Silica Business

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Dec 15, 2016, 02:49 ET

CLEVELAND, Dec. 15, 2016 /PRNewswire/ -- Germany-based Evonik recently announced the acquisition of one of its competitors: the silica business of JM Huber. The price tag of the deal comes in at $630 million, the latest in a string of acquisitions this year by the chemicals giant, which includes the $3.8 billion purchase of Air Products & Chemicals' performance-materials division and that of French biotech firm Alkion Biopharma. The latest move is part of Evonik's corporate strategy to deploy cash on targeted acquisitions, ultimately to increase its size and margins.

In March of 2016, Evonik CEO Klaus Engel noted the ease with which companies could obtain funds for financing, fueling merger and acquisition activity across industries. Bloomberg also notes that Solvay's 2015 acquisition of aerospace composites manufacturer Cytec was an effort to move out of commodity chemicals into higher-margin specialty chemicals, which is also one of Evonik's goals. There article can be read here: https://www.bloomberg.com/news/articles/2016-05-06/evonik-said-near-3-5-billion-acquisition-of-air-products-units.

Evonik anticipates growth in the silicas market of 4-6% per year, besting the chemicals sector overall. Freedonia analyst Larry Catsonis agrees, pegging growth for precipitated silica in the US at around 5% per year through 2019. "JM Huber's silica division, with its focus on dental and other consumer products, is a good complement for Evonik's more industrial-focused applications in tires and coatings," notes Catsonis.

Cosmetics and toiletries, which includes dental products like JM Huber's Zeodent line of products, represent the second largest market for specialty silicas. Leading toothpaste manufacturers now generally offer a number of toothpastes and gels featuring silica that are designed to whiten teeth, according to Catsonis. However, the most exciting developments in the silica industry are in the large tire rubber market, where silica is added to tires to increase fuel efficiency.

To find out more about silicas and view the Specialty Silicas study, follow this link: http://www.freedoniagroup.com/industry-study/specialty-silicas-3368.htm.

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