Chemical-watcher: Phila bracing for more energy investment
AJ Scamuffa, PwC's man in Philly, sees a pickup in investor interest here
A.J. Scamuffa, the Philadelphia-based partner who leads accounting-consulting giant PricewaterhouseCoopers' U.S. chemicals business, says his group is bracing for more deals and expansions.
Earlier this year, the number and value of North American plant sales rose, as cash-rich owners consolidated smaller and rival plants. Buyout firms, by contrast, have mostly stayed on the sidelines -- but more and more are scouting "middle-market" companies, Scamuffa told me. "When the financial crisis hit back in 2008, financial buyers dried up. What we've had [lately] is a lot of bolt-on acquisitions. But we're starting to see the private-equity folks come back, looking for underinvested businesses they can buy from larger companies.
When "strategic" companies buy, they typically cut jobs and consolidate (think Dow's 2008 purchase of Rohm and Haas, or Ashand's absorption of Hercules Inc.) by contrast, "financial" acquirers and private equity investors (think Carlyle and its Philadelphia area refinery and materials purchases) are 'more likely to create jobs."
Foreign buyers are showing more interest in U.S. assets, Scamuffa added. "A lot of the shale gas" has attracted investor reviews, though not always buyers. "We're seeing more investment put into the US as a cheap energy source, a cheap raw material source, cheap ethane and ethylene. There's been a lot of investment in companies building plants along the Gulf Coast. The US is becoming more attractive to these people."
Will this spread to Philadelphia? Will more companies join Carlyle and Brazilian chemical maker Braskem in buying local plants and expanding them -- or building new works to take advantage of cheap shale gases and fuels?
Scamuzza wouuldn't discuss specific companies. Generally "there's a lot of talent within the area," and the several local engineering and business schools to help new operations staff up, Scamuffa said.
"I absolutely think (cheap fuel) is going to translate to more industry. Those refineries that were going to close have been repurposed or reopened. You had that shale gas conference in Philadelphia. All this increases interest, I really think this is great for the area. You have the opportunity to get manufacturing back into the area after we lost so much to acquisitions and in general. You're starting to see more and more companies will be moving back into the area and adding jobs."
