specialty chemicals continue to see strong growth …

3

March 2021

SPECIALTY CHEMICALS CONTINUE TO SEE STRONG GROWTH POTENTIALCHEMICALS INDUSTRY UPDATE | MARCH 2021

KEY INDUSTRY TAKEAWAYS

2

Sophea ChauManaging Director,Consumer & Retail

Jesse Betzner Vice President,Consumer & Retail

Chemicals Industry Update Specialty Chemicals Continue To See Strong

Growth Potential

Capstone Headwaters’ Industrials Group is pleased to share its ChemicalsIndustry update. Through our ongoing conversations with active industry playersand analysis of trends during COVID-19, we have identified several key takeawaysbelow, followed by an in-depth overview of industry dynamics on the followingpages.

1. Pandemic-induced manufacturing slowdowns and demand shocks haveresulted in a 3.6% decrease in total chemical production value in 2020 year-over-year (YOY).

2. Chemicals have played a critical role throughout the pandemic providinginputs for disinfection and sanitation, protective equipment, and medicalsupplies and equipment.

3. Ethane is expected to remain the dominant feedstock in 2021 as oil pricescontinue to recover due to a shrinking supply of oil in storage.

4. While specialty chemicals saw depressed demand across nearly all endmarkets in Q2 and Q3 2020, Capstone expects end market recovery to fueldemand throughout 2021, driving merger and acquisition (M&A) activity.

5. Strategic buyers have accounted for 67.1% of 2021 year-to-date (YTD)transaction activity as industry participants continue to utilize M&A to formsynergies and bolster service offerings.

6. Add-on deals have composed 20.0% of total 2021 YTD volume as PE-backedcompanies have used tuck-in acquisitions to enhance their product portfoliosand expand geographically.

7. M&A activity has exceeded prior year levels in 2021 YTD, providing optimismfor a healthy deal environment throughout the remainder of the year.

CONTACTSDoug UsiferManaging Director [email protected]

David BenchManaging [email protected]

Tracy [email protected]

TABLE OF CONTENTS

Industry Outlook Segment Highlight Oil & Gas Impact on Feedstocks M&A Overview Notable Transactions Select Transactions Public Company Data Report Contributors Firm Track Record

INDUSTRY OUTLOOK

In 2020, total chemical production volume, excludingpharmaceuticals, fell by 3.6% YOY due to pandemic-induced manufacturing slowdowns and demand shocks,according a press release by the American ChemistryCouncil (ACC).1 End market performance amid thepandemic has largely impacted downstream demand forchemical manufacturers. Chemicals have been crucial incombatting COVID-19, providing inputs for disinfectionand sanitation, protective equipment, and medicalsupplies and equipment. However, plastic resins were theonly segment to post growth in 2020, benefitting from itsvital role as an input in COVID-19 related equipment andthe rapidly developing Automotive market. The PlasticResins market is estimated to experience a compoundannual growth rate (CAGR) of 4% from 2020-2027,according to Grand View Research.2

While specialty chemicals saw depressed demand acrossnearly all end markets in Q2 and Q3 2020, Capstoneexpects end market recovery to fuel demand throughout2021, driving M&A activity. The global specialty chemicalsmarket size is expected to expand at a CAGR of 3.7%through 2027, according to Grand View Research.3Notably, Capstone’s Chemicals index has indicated anEBITDA multiple increase of 103.5% on March 1st, 2021from its trough on March 23rd, 2020 while the DJIA andS&P 500 Chemicals Industry indices recovered 67.7% and76.1%, respectively, reflecting the industry’s defensibility.Ethane is expected to remain the dominant feedstock in2021 as oil prices continue to recover due to a shrinkingsupply of oil in storage.

Chemicals | March 2021

Source: IHS Markit, Capital IQ, PitchBook, FactSet, and Capstone Research

% Ch

ange

YOY

Annual U.S. Chemical Product Manufacturing Revenues Forecasted to Improve Steadily Following

a Substantial Decline in 2020

Growing customer demand, stabilizingexport markets, and a competitive edgelinked to domestic supplies of shale gasand natural gas liquids (NGLs) are amongthe factors pointing to continued gainsin U.S. chemistry.

“

”Martha Moore, Senior Director of Policy Analysis and Economics at the ACC, in the press release

Chemicals Index Annual Return Reaches 33.3% in March

-70%-50%-30%-10%10%30%50%70%

Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21

Chemicals Index DJIA S&P 500 - Chemicals Industry

Total

Ret

urn

Index includes: AKZA, AKE, 3407, BAS, BAYN, DOW, DD, EMN, XOM, 1301, A051910, LYB, PPG, 2010, 338

Source: FactSet (as of March 2, 2021)

3

36.4%

18.1%33.3%

-18.5%

7.4%4.0% 3.4% 3.7% 3.4%

-30%

-20%

-10%

0%

10%

20%

2020 2021 2022 2023 2024 2025

SEGMENT HIGHLIGHTSpecialty chemicals have important applications in theFood and Beverage industry, functioning as inputs foringredients and preservatives. In recent years, consumershave shifted diets towards health-conscious and plant-based foods, while also placing emphasis on sustainableproduction practices. This has heightened demand forchemical companies that specialize in the production ofhealthy and sustainable inputs for the Food and Beverageindustry. This trend has accelerated amid the pandemic asplant-based meat alternative providers experiencedhistoric sales levels in Q3 driven by panic-buying. Whileconsumers increasingly sought healthy meat alternativesat the height of the pandemic, plant-based food saleshave also demonstrated sequential pre-pandemic growth,increasing 29% in 2019 from 2017, according to the PlantBased Foods Association.4 Capstone believes thatspecialty chemical companies will continue to formulatenew methods of enhancing the health and sustainabilityof food and beverage ingredients through healthieralternative inputs to capture elevated demand in theplant-based food end market.

The trend has also increased demand for low calorie sugaralternatives. Notably, the market share for naturalsweeteners is projected to reach $12.5 billion by 2026,according to Global Market Insights.5 Specialty chemicalsproducers that have pivoted investment toward foodingredients with low health-risk profiles have benefittedfrom the low-sugar megatrend. This is evidenced bygrowth in Tate & Lyle’s (LSE:TATE) Food & Beveragesegment amid the pandemic. “Food & BeverageSolutions continues to perform well and benefit fromconsumers seeking healthier alternatives from their foodand drink. Consumers are looking for more sugar andcalorie-reduced products, cleaner labels and more naturalingredients as well as improved texture and taste,” saidNick Hampton, Chief Executive Officer and ExecutiveDirector of Tate & Lyle, in an earnings call.6

In addition to increased research and developmentinvestment, industry participants have pursued strategicacquisitions in order to augment exposure to the growingmarket for healthy sweetener alternatives. This isevidenced by International Flavors & Fragrances’(NYSE:IFF) $26.5 billion acquisition of DuPont de Nemours’Nutrition & Biosciences business (February 2021).DuPont’s Nutrition & Biosciences business provideshealthy and sustainable solutions for the food, beverage,dietary supplement, and pharmaceutical industries.Through the acquisition, IFF has expanded its global reachand capabilities to create solutions for healthier products,according to a press release.7 Likewise, IngredionIncorporated (NYSE:INGR) acquired PureCircle (July 2020,

4

Source: Nielsen

40% 37% 39% 23% 20%

231%

164% 159%

119%90%

0%

100%

200%

300%

Mar Apr May Jun July

Conventional Meat Plant-based Meat Alternatives

Meat and Plant-based Meat Alternative SalesPlant-based meat sales are up significantly YOY despite

normalizing after a large spike at the height of the pandemic in March

Perce

nt C

hang

e in S

ales (

YOY)

Key Performance Indicators

Acquiring New Business: Companies have utilized M&A to bolster natural and organic ingredient formulation capabilities.

Investing in R&D: Companies have invested in research and development in order to enhance the health and sustainability of products.

Pivoting Towards Clean Foods: Chemical companies serving the food industry have invested in cleaner and healthier products.

$91.4 million) and Tate & Lyle acquired Sweet GreenFields (December 2020, Undisclosed). PureCircle andSweet Green Fields are both leading producers of stevia, azero-calorie sugar supplement. Capstone believes thatchemicals companies providing inputs for the Food andBeverage industry will continue to utilize strategic M&A inorder to capture the heightened demand for natural andhealthier ingredient alternatives.

Source: Capital IQ, Company Press Releases, and Capstone Research


OIL & GAS IMPACT ON FEEDSTOCKS

West Texas Intermediate Crude Spot Price

Recovers in February

Crude oil prices have rebounded to $99/barrel,

reaching pre-pandemic levels in February after

declining to -$60/barrel in April. Recovering demand

and paused drilling activity have driven the increase in

oil prices.

U.S.

Dolla

rs Pe

r Bar

rel

Following significant losses in September due to a robust storage injection, natural gas

prices have experienced a resurgence fueled by

tightening supply and demand fundamentals.

$/Mmbtu=dollars per million British thermal unitsNote: Year-to-date (YTD) ended February 18 and shaded area indicates post-pandemic declaration

Source: FactSet

$/M

mbt

u

Note: Year-to-date (YTD) ended February 18 and shaded area indicates post-pandemic declarationSource: FactSet and Capstone Research

5

U.S. oil and gas prices have recovered, reaching pre-pandemic levels after experiencing significant declines attributed to supplyand demand disruptions in 2020. In response to low prices, producers were forced to pause drilling activity resulting in a declinein oil and natural gas production. Higher volumes of natural gas in storage following production records in 2018 and 2019added to the downward pressure on natural gas prices in 2020. In 2021, U.S. natural gas production is estimated to decline byanother 2% averaging 95.9 billion cubic feet per day (Bcf/d) and U.S. crude oil production is estimated to average 11.1 millionbarrels per day (b/d) in 2021, down 0.2 million b/d from 2020, according to the U.S. Energy Information Administration (EIA).8

In recent years, the U.S. has experienced strong petrochemical growth driven by an abundant supply of ethane feedstock which isa less-costly substitute for oil-derived naphtha feedstock. Ethane is a leading chemical input derived from natural gas that isused to produce ethylene. The U.S. has a feedstock advantage for export competitiveness over manufacturers that only haveaccess to higher-cost naphtha feedstock. However, the pandemic has forced oil and gas producers to shut down resulting in adecline in the ethane feedstock supply and a corresponding increase in U.S. ethane prices.


Henry Hub Natural Gas Spot Price Eclipses

$3/Mmbtu in February

$0

$1

$2

$3

$4

$5

$6

-$80

-$40

$0

$40

$80

$120

$160

M&A OVERVIEW

Merger and acquisition (M&A) activity declined 14.2%YOY in the Chemicals industry in 2020 as COVID-19headwinds resulted in drastic drops in transaction volumein Q2 (29.8%) and Q3 (53.8%). However, transactionvolume normalized and exceeded prior year levels in Q4,demonstrating the industry’s resilience. M&A activity hascontinued to surge through YTD 2021, increasing 42.9%from the same period in 2020.

Strategic buyers have accounted for 67.1% of 2021 YTDtransaction activity as industry participants continue toutilize M&A to form synergies and bolster serviceofferings. Several transformative strategic deals haveoccurred in 2021 so far, including Cerberus CapitalManagement and Koch Minerals’ joint agreement toacquire PQ Group’s (NYSE:PQG) Performance ChemicalBusiness, (March 2021, $1.1 billion) and Lanxess AG’s(XTRA:LXS) binding agreement to acquire Emerald KalamaChemical (February 2021, $1.1 billion).

Private equity buyers (PE) continue to display interest inthe space, accounting for 32.9% of deal activity in 2021YTD. Add-on deals have composed 20.0% of total 2021volume as PE-backed companies have used tuck-inacquisitions to enhance their product portfolios andexpand geographically, evidenced by USALCO’sacquisition of Al Chem/CalChem (January 2021). Throughthe acquisition, USALCO, a platform company of H.I.G.capital, has expanded its product portfolio and endmarket applications while further establishing its nationalpresence, according to a press release.9 With a recoveringdebt environment, PE firms have continued to pursueplatform deals, accounting for 12.9% of 2021 YTD volume.This is exemplified by Bain Capital and Cinven Limited’sdefinitive agreement on a joint acquisition of LonzaSpecialty Ingredients (February 2021, $4.7 billion).

2021 YTD Buyer Breakdown

Note: Year-to-date ended March 2Source: Capital IQ, PitchBook, FactSet, and Capstone Research

Chemicals M&A Volume

48 4765 5964

33 30

6170

0

30

60

90

120

Q1 Q2 Q3 Q4Tr

ansa

ction

Volu

me

2019 2020 2021 YTD

STRATEGICPrivatePublic

FINANCIALAdd-onPlatform

M&A activity exceeds prior year levels in 2021 YTD, providing optimism for a healthy deal environment for

the remainder of the year

37.1%

30.0%

12.9%

20.0%


6

Doug Usifer, Managing Director“Several categories have fared very well through the 2020 pandemic driven by strong demand and high performance. These categories include specialty food ingredients, antimicrobial chemicals, and specialties with unique efficacy such as food additives and preservatives, chemical inhibitors and stabilizers, and high-performance plastics. We are seeing strong M&A activity driven by pent-up demand and excess capital that potential buyers are eager to deploy. Companies that remained relatively stable or grew during the pandemic will be viewed favorably from a valuation perspective.”

NOTABLE TRANSACTIONS

7

To acquire

LANXESS Aktiengesellschaft (XTRA:LXS), a global specialty chemicals company based in Germany, hassigned a binding agreement to acquire Emerald Kalama Chemical, LLC for an enterprise value of $1.1billion (11.9x EBITDA), according to a press release.10 U.S.-based Emerald Kalama Chemical is a leadingglobal manufacturer of specialty chemicals that generates approximately 75% of its turnover in theconsumer segment. LANXESS will finance the acquisition from existing liquidity.

Through the transaction, LANXESS will enlarge its presence in the U.S. and expand its portfolio ofantimicrobial inputs with applications in consumer protection products and animal hygiene. “We aregaining further momentum in our growth course. The businesses of Emerald Kalama Chemical are anideal fit for us. We will further strengthen our Consumer Protection segment and open up newapplication areas with strong margins, for example in the food industry and animal health sector,” saidMatthias Zachert, Chairman of the Board of Management of LANXESS, in the press release.

LANXESS Aktiengesellschaft to acquire Emerald Kalama Chemical, LLC(February 2021, $1.1 Billion)

Several notable transactions have been announced or completed in the industry in 2020 and 2021 YTD. Select transactions are outlined below, followed by a more comprehensive list on the following pages.

Bain Capital Private Equity, LP and Cinven Limited have entered into definitive agreements to acquireLonza Specialty Ingredients (“LSI”) from Lonza AG, for a total enterprise value of $4.7 billion, accordingto a press release.11 Switzerland-based LSI manufactures a variety of differentiated specialty chemicalsfor microbial control solutions. The company has a particularly strong presence in the ProfessionalHygiene and Home & Personal Care end markets.

Through the joint acquisition, LSI will have the financial capabilities to continue to invest in research anddevelopment to enhance its product portfolio. Additionally, Bain Capital and Cinven Limited indicatedthat LSI will serve as a platform to pursue further acquisitions in the Microbial Control market. “Ourstrategy is to reinforce the company’s market position, to accelerate growth through further investmentin R&D and innovation, and to use LSI as a platform for further industry consolidation in line with BainCapital’s and Cinven’s strategies in other sectors,” said David Danon, Managing Director at Bain Capital,in the press release.

Bain Capital Private Equity, LP and Cinven Limited acquire Lonza Specialty Ingredients(February 2021, $4.7 Billion)

Tate & Lyle PLC acquires Sweet Green Fields Llc(December 2020, Undisclosed)

Tate & Lyle (LSE:TATE), a leading provider of food and beverage ingredients solutions, has acquiredremaining shares of Sweet Green Fields, a leading stevia producer, for an undisclosed sum. Tate & Lyleformed a partnership with Sweet Green Fields in 2017 and then acquired 15% equity in the companythe following year. Stevia is one of the fastest growing low-calorie sweeteners internationally. Notably,product launches that contain stevia grew by a compound annual growth rate of 15% between 2015and 2019, according to a press release.12

The acquisition of Sweet Green Fields further solidifies Tate & Lyle’s status as a leading provider ofinnovative sweetener solutions. Additionally, the transaction simplifies the existing relationshipbetween these two companies, creating a fully integrated supply chain and commercial organization,unified research and development capabilities, and the capacity to accelerate innovation and improveproduction technologies, according to the press release.


Acquires

To acquire

and

Enterprise EV / LTMDate Target Acquirer Target Business Description Value (mm) Revenue EBITDA

02/18/21 PQ Group (NYSE:PQG)

Cerberus Capital; Koch Minerals Offers performance chemicals. $1,100.0 7.7x -

02/25/21 Assets of Albemarle W.R. Grace & Co. (NYSE:GRA) Manufactures specialty chemicals. $570.0 - -

02/18/21 Wattyl Hempel Manufactures and sells architectural and protective paints and coatings. - - -

02/15/21 JDC Solutions Avery Dennison (NYSE:AVY)

Manufactures and offers pressure-sensitive adhesive coated films $24.0 0.8x -

02/14/21 Emerald Performance LANXESS (XTRA:LXS) Develops, manufactures, and markets chemical

intermediates, specialty chemicals, and plastics. $1,075.0 2.5x 11.9x

02/08/21 Lonza Specialty Ingredients Bain Capital; Cinven Manufactures specialty chemicals for microbial control

solutions. $4,671.1 - -

01/19/21 Verdesian Life Sciences AEA Investors Develops and produces nutrient management and

efficiency technologies. - - -

01/05/21 VersaFlex PPG Industries (NYSE:PPG) Manufactures and supplies protective coatings. - - -

12/31/20 RÜTGERS Polymers

CPS Performance Materials Manufactures and distributes polymer-based products. $78.0 - -

12/30/20 FONA International

McCormick & Co. (NYSE:MKC)

Develops and produces flavors for food, beverage, and nutritional companies worldwide. $710.0 - -

12/30/20 Industrial Soap Company Imperial Dade Distributes janitorial products in the United States. - - -

12/30/20 Desai-Aire GracoRoberts Distributes chemicals and other aerospace equipment. - - -

12/23/20 Assets of Canopy Crop

GrowGeneration(NAS:GRWG) Distributes silicic acid-enriched fertilizers. - - -

12/23/20 New Nautical Coatings

Akzo Nobel (ENXTAM:AKZA)

Develops and manufactures antifouling paints and coatings. - - -

12/23/20 Shawcor (TSX:SCL) Seal for Life Industries

Manufactures heat shrinkable sleeves, adhesives, and liquid coatings. $91.5 1.1x -

12/23/20 Assets of Prime Source Albaugh Manufactures agricultural and specialty pesticide. - - -

12/22/20 Mega Lubricants John W. Stone Oil Distributor Produces and wholesales petroleum products. $22.0 - -

12/21/20 Alpha Chemical Brenntag Canada Blends, manufactures, repackages, and distributes cleaners and disinfectants in Atlantic Canada. - - -

12/21/20 IsleChem Aceto Manufactures performance chemical products. - - -

12/15/20 Assets of Green Plains Hereford Hereford Ethanol Manufactures chemicals. $115.0 - -

12/14/20 Assets of Arkema (ENXTPA:AKE) Trinseo (NYSE:TSE) Manufactures chemicals. $1,360.0 2.2x 6.2x

12/07/20 Response Technologies Bell Textron Manufactures additive for national defense, energy,

aerospace, automotive, and transportation industry. - - -

Source: Capital IQ, PitchBook, FactSet, and Capstone Research

SELECT TRANSACTIONS

8


Enterprise EV / LTMDate Target Acquirer Target Business Description Value (mm) Revenue EBITDA

12/07/20 Gabriel Performance

Huntsman Corp. (NYSE:HUN)

Manufactures specialty additives and epoxy curing agents. $250.0 2.4x 11.0x

12/07/20 Assets of DURECT (Nasdaq:DRRX)

Evonik Industries (XTRA:EVK) Manufactures absorbable polymers product. $15.0 - -

12/04/20 Colorado Photopolymer

Arkema. (ENXTPA:AKE)

Develops resin formulations and photopolymer materials. - - -

12/01/20 Assets of Winslow Browning Protech Chimie Manufactures liquid coatings. - - -

12/01/20 Sweet Green Fields Tate & Lyle (LSE:TATE) Distributes janitorial equipment. - - -

11/30/20 Ennis-Flint PPG Industries (NYSE:PPG)

Manufactures and supplies pavement marking materials. $1,150.0 - -

11/24/20 Gemini HDPE INEOS Olefins & Polymers USA Manufactures high density polyethylene chemicals. $808.0 - -

11/23/20 Assets of Sensient Technologies Symrise (XTRA:SY1) Manufactures fragrances. - - -

11/19/20 Kano Laboratories Gryphon Investors Producer of oils and lubricants. - - -

11/16/20 PureCycleTechnologies

Roth CH Acquisition I Co. (NAS:ROCH) Produces recycled polypropylene. $1,206.0 - -

11/09/20 W. R. Grace & Co. (NYSE:GRA)

40 North Management Sells specialty chemicals and materials worldwide. $5,991.4 3.5x 14.7x

11/02/20 PolySi Technologies Fuchs Petrolub(XTRA:FPE3)

Manufactures silicone and synthetic greases and lubricants. - - -

10/30/20 Core One Labs (CNSX:COOL) High Tower Capital Manufactures and sells cannabis-infused strips. $6.0 - -

10/19/20 Assets of NOVA Chemicals

ALPEK(BMV:ALPEK A) Manufactures polystyrene and resin. - - -

10/15/20 Potters Industries The Jordan Co. Manufactures glass beads for highway safety. $650.0 - -

10/13/20 ANGUS Chemical Company Ardian Manufactures and distributes nitroalkanes and

their derivatives. $2,250.0 6.7x -

10/07/20 CLP Chemicals Shrieve Chemical Company

Distributes styrene, acrylates, acetic acid, glycerin and other niche chemicals. - - -

10/07/20 Dallas Plastics Sole Source Capital Extrudes and manufactures polyethylene films - - -

10/02/20 Assets of Sasol Chemicals

LyondellBasell (NYSE:LYB) Produces linear-low density polyethylene and ethane. - - -

10/01/20 Fire Retardant Chemical Tech. UFP Retail Engages in production, development, and testing of

chemicals, fire retardants, and water repellants. $5.9 0.9x -

10/01/20 Poteet Printing Systems Flint Group Manufactures and sells water-based inks for

flexographic applications. - - -

09/30/20 Reliable Analysis Applus Services (BME:APPS) Provides chemical and thermal analysis services. $78.7 2.8x -

Source: Capital IQ, PitchBook, FactSet, and Capstone Research

SELECT TRANSACTIONS (CONTINUED)

9


PUBLIC COMPANY TRADING & OPERATING DATA

Index includes: AKZA, AKE, 3407, BAS, DOW, DD, EMN, 1301, A051910, LYB, PPG, 2010, 338

Source: Capital IQ as of March 2, 2021

10

Price % 52 Wk Market Enterprise LTM EV / LTMCompany 02/16/21 High Cap Value Revenue EBITDA Margin Revenue EBITDAAkzo Nobel N.V. $104.00 92.2% $19,644.2 $21,484.8 $10,055.2 $1,528.9 15.2% 2.1x 14.1xArkema S.A. $108.77 90.3% $8,277.0 $9,754.3 $9,337.7 $1,592.3 17.1% 1.0x 6.1xAsahi Kasei Corporation $11.11 92.6% $15,415.2 $20,145.3 $20,345.3 $2,889.5 14.2% 1.0x 7.0xBASF SE $81.92 97.7% $75,264.5 $95,126.5 $68,024.9 $2,087.8 3.1% 1.4x NMBayer Aktiengesellschaft $66.24 71.8% $64,896.1 $98,875.3 $49,500.9 NM NA 2.0x NMDow Inc. $58.75 95.8% $43,705.0 $58,352.0 $38,542.0 $6,299.0 16.3% 1.5x 9.3xDuPont de Nemours, Inc. $70.99 81.3% $38,198.9 $58,673.9 $20,397.0 $5,203.0 25.5% 2.9x 11.3xEastman Chemical Company $110.32 99.2% $14,992.5 $20,478.5 $8,473.0 $1,558.0 18.4% 2.4x 13.1xExxon Mobil Corporation $52.04 85.8% $220,285.3 $287,464.3 $181,502.0 NM 14.8% 1.6x NMFormosa Plastics Corporation $3.44 97.2% $20,390.4 $20,545.1 $6,207.2 $724.0 11.7% 3.3x NMLG Chem, Ltd. $883.55 93.1% $64,581.4 $72,229.0 $25,641.9 $3,559.2 13.9% 2.8x 20.3xLyondellBasell Industries N.V. $97.99 98.1% $32,720.7 $47,567.7 $27,753.0 $4,384.0 15.8% 1.7x 10.9xPPG Industries, Inc. $137.35 89.3% $32,442.7 $36,714.7 $13,834.0 $2,256.0 16.3% 2.7x 16.3xSABIC $27.46 96.8% $82,375.8 $91,338.1 $31,175.7 $5,116.9 16.4% 2.9x 17.9xSinopec Shanghai Petrochemical $0.24 82.5% $5,005.4 $4,607.6 $11,770.4 $24.4 0.2% 0.4x NM

Mean 14.2% 2.0x 12.6xMedian 15.5% 2.0x 12.2xHarmonic Mean 2.4% 1.5x 7.9x

EV = enterprise value; LTM = last twelve months$ in millions, except per share dataNM = Not meaningful

Chemicals Index Average EBITDA Multiple More than Doubles YOY

0x

10x

20x

30x

Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21

Chemicals Index DJIA S&P 500 - Chemicals Industry


17.4x16.2x12.9x

EBITD

A M

ultipl

es

CHEMICALS REPORT CONTRIBUTORS

11

2019US MIDDLE MARKET INVESTMENT BANK

OF THE YEAR

TURNAROUND AWARDS

2019

INVESTMENT BANKING FIRM OF THE YEAR

INTERNATIONAL AWARDS

2019


2020MIDDLE MARKETINVESTMENT BANK

OF THE YEAR

2020


David BenchManaging Director [email protected] | 949-734-7888

David is a Managing Director based out of Orange County. Prior to Capstone Headwaters, Davidmanaged the Western region for Morgan Stanley Smith Barney’s Capital Strategies Group and itspredecessor, Citi Capital Strategies. David has focused on middle market investment banking fornearly 32 years and has been the lead banker in over 250 M&A transactions involving both domesticand foreign corporate buyers, as well as leveraged recaps with private equity sponsors. David’sachievements in investment banking have gained national recognition by The M&A Advisor: one of histransactions was awarded the “Private Equity Deal of the Year,” while another was recognized as the“Energy Deal of the Year.” Mr. Bench has also been awarded “Middle Market Financing Professional ofthe Year,” an award recognizing M&A’s most accomplished professionals. Mr. Bench holds a BS andan MBA in Finance from Brigham Young University. He is a Series 7 and 63 Registered SecuritiesRepresentative and a Series 24 Registered Securities Principal.

Doug UsiferManaging [email protected] | 802-735-2330

Dr. Doug Usifer, Managing Director, joined Capstone Headwaters from Atlas Advisors where hefocused on the firm’s Industrials practice. He has over 20 years of experience in investment bankingand industrial sectors including chemicals, plastics, waste and scrap metal. Prior to Atlas, Doug workedat National Starch as Business Director, Food Emulsions and Encapsulation, where he was GeneralManager of a $40MM global specialty food ingredients business. He also worked on M&Atransactions including National Starch's acquisition of Penford's resistant starch business.

Prior to National Starch, Doug worked at Engelhard Corporation in several capacities, includingBusiness Development Manager, Corporate New Ventures; Marketing Manager, Special EffectPigments; Manager, Technology and Market Development, Performance Additives/Specialty Minerals.While at Engelhard, he worked on M&A transactions including the acquisition of Mearl Corp, a USproducer of pearlescent pigments and iridescent films. He previously worked at Cambrex Corporation(pharmaceutical fine chemicals) and Hoechst Celanese (electronic products and plastics).

Doug holds an executive MBA in Finance from Rutgers University, Ph.D. and MS degrees in OrganicChemistry from Rensselaer Polytechnic Institute, and a BA in Chemistry from Saint Michael's College.


CHEMICALS REPORT CONTRIBUTORS

12

Christopher CardinaleVice [email protected] | 949-220-0537

Christopher is a Vice President in the Orange County office. He supports management and clients inthe Western Region. Christopher is engaged in the execution and advisory of mergers, acquisitionsand strategic capital raises. Prior to joining Capstone Headwaters, he was an associate with a boutiqueM&A firm focused on valuation, M&A advisory, corporate finance, acquisition target research andexit-planning strategy. His industry experience includes manufacturing, healthcare, TMT andconsumer. Christopher was also a research analyst in the M&A department at United Capital FinancialAdvisors. He earned a BA from the University of San Diego. Christopher is a FINRA Series 79 and 63Registered Securities Representative.

Tracy [email protected] | 949-220-0540

Tracy is a Director in the Orange County office, supporting the management of the Western Region.Prior to Capstone Headwaters, Tracy worked as a senior banking professional in Morgan StanleySmith Barney’s Capital Strategies Group and its predecessor, Citi Capital Strategies. She possesses 17years 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 withCollins/Bay Island Securities LLC and Talisman Capital. Prior to that, Mrs. Patch worked withinstitutional fixed income sales at Vining Sparks IBG, LP and Robert Thomas Securities, Inc. She alsowas a manager at The Disney Company. Mrs. Patch holds an MBA from Pepperdine University and aBS in Finance from Miami University of Ohio. She is a Series 7 and 63 Registered SecuritiesRepresentative.

John [email protected] | 802-863-2700

John is an Associate in the Burlington office. He is engaged in the execution and advisory of mergers,acquisitions and strategic capital raises. Prior to joining Capstone Headwaters, he was with GoldmanSachs Asset Management in their fixed income defined contribution division. His industry experienceincludes Chemicals and Waste. He earned a BS and an MBA from the University of Vermont. John is aFINRA Series 79 Registered Securities Representative.

Lucas LaCroceResearch [email protected] | 617-619-3331

Luke serves as a Research Analyst at Capstone Headwaters primarily focusing on the Industrials andBusiness Services industries. Before joining the firm’s corporate Research Team, Luke was an intern atDLG Wealth Management, Valpey Financial Services, and VIGILANT Capital Management where heperformed financial analysis on equities, evaluated exchange traded funds and mutual funds, anddetermined the impact of proposed legislation on financial planning strategies. Luke earned a BA inEconomics and English from Union College.


FIRM TRACK RECORD

13

Capstone Headwaters maintains an active Industrial & Manufacturing practice in the middle market, with Chemicals being animportant vertical within our focus. This market presence allows Capstone Headwaters to provide chemical companies withup-to-date market data and access to key decision makers among the industry’s most active acquirers and investors.

has been acquired by has been acquired by

has been acquired by has been acquired byhas been acquired by has been acquired by

corporate sale(IN PROCESS)

has acquired has been acquired by

has been acquired by

D.B. Western - Texascorporate sale(IN PROCESS)

CONFIDENTIAL

Sanitation Products Provider

CONFIDENTIAL

Food Ingredients Distributor


CITATIONS

1. American Chemistry Council, “Chemical Industry Outlook: Recover from the COVID-19 Global Recession,” https://www.americanchemistry.com/Media/PressReleasesTranscripts/ACC-news-releases/Chemical-Industry-Outlook-Recovery-from-the-COVID-19-Global Recession.html#:~:text=Total%20chemicals%20trade%20is%20projected,to%20%24105.5%20billion%20in%202021, accessed February 24, 2021.

2. Grand View Research, “Plastic Resin Market Size, Share & Trends Analysis Report By Product,” https://www.grandviewresearch.com/industry-analysis/plastic-resins-market, accessed February 24, 2021.

3. Grand View Research, “Plastic Resin Market Size, Share & Trends Analysis Report By Product,” https://www.grandviewresearch.com/industry-analysis/specialty-chemicals-market, accessed March 4, 2021.

4. Plant Based Food Association, “New Data Shows Plant-Based Food Outpacing Total Food Sales During COVID-19,” https://plantbasedfoods.org/plant-based-food-outpaces-total-food-sales-during-covid19/, accessed February 8, 2021.

5. Global Market Insights, “Natural Sweeteners Market size to exceed $12.5bn by 2026,” https://www.gminsights.com/pressrelease/natural-sweeteners-market?utm_source=globenewswire.com&utm_medium=referral&utm_campaign=Paid_globenewswire, accessed February 8, 2021.

6. Tate & Lyle “Half Year Results,” https://www.tateandlyle.com/sites/default/files/2020-11/tatehy2120201105transcript.pdf, accessed February 8, 2021.7. IFF, “IFF to Merge with DuPont’s Nutrition & Biosciences Business,” https://ir.iff.com/news-releases/news-release-details/iff-merge-duponts-

nutrition-biosciences-business, accessed February 8, 2021.8. U.S. Energy Information Administration, “Short-term Energy Outlook,” https://www.eia.gov/outlooks/steo/, accessed February 8, 2021.9. H.I.G. Capital “USALCO Completes Acquisition of AlChem and CalCHEM,” https://higcapital.com/news/release/usalco-completes-acquisition-of-

alchem-and-calchem, accessed February 11, 2021. 10. LANXESS, “LANXESS signs contract to acquire Emerald Kalama Chemical,” https://higcapital.com/news/release/usalco-completes-acquisition-of-

alchem-and-calchem, accessed March 8, 2021.11. Bain Capital, “Bain Capital Private Equity and Cinven enter into definitive agreements to acquire Lonza Specialty Ingredients,”

https://www.baincapital.com/news/bain-capital-private-equity-and-cinven-enter-definitive-agreements-acquire-lonza-specialty, accessed March 8, 2021.

12. Food Dive, “Tate & Lyle acquires stevia manufacturer Sweet Green Fields,” https://www.fooddive.com/news/tate-lyle-acquires-stevia-manufacturer-sweet-green-fields/591502/, accessed February 8, 2021.

Disclosure: This report is a periodic compilation of certain economic and corporate information, as well as completed and announced merger and acquisi-tion activity. Information contained in this report should not be construed as a recommendation to sell or buy any security. Any reference to or omission ofany reference to any company in this report should not be construed as a recommendation to buy, sell or take any other action with respect to any security ofany such company. We are not soliciting any action with respect to any security or company based on this report. The report is published solely for thegeneral information of clients and friends of Capstone Headwaters. It does not take into account the particular investment objectives, financial situation orneeds of individual recipients. Certain transactions, including those involving early-stage companies, give rise to substantial risk and are not suitable for allinvestors. This report is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be reliedupon as such. Prediction of future events is inherently subject to both known and unknown risks and other factors that may cause actual results to varymaterially. We are under no obligation to update the information contained in this report. Opinions expressed are our present opinions only and are subjectto change without notice. Additional information is available upon request. The companies mentioned in this report may be clients of Capstone Headwaters.The decisions to include any company in this report is unrelated in all respects to any service that Capstone Headwaters may provide to such company. Thisreport may not be copied or reproduced in any form, or redistributed without the prior written consent of Capstone Headwaters. The information containedherein should not be construed as legal advice.

14


12

www.capstoneheadwaters.com

Capstone Headwaters is one of the largest and most active independent investment banking firms in the United States. Thefirm has a rich, 20-year history of achieving extraordinary results for middle market entrepreneurs, business owners, investors,and creditors. Capstone offers a fully integrated suite of corporate finance services, including M&A, debt and equityplacement, corporate restructuring, valuation and fairness opinions, financial advisory, and ESOP advisory services.

Headquartered in Boston, the firm has 175+ professionals across 17 offices in the U.S., and an international presenceincluding over 450 professionals in 40 countries. With 16 dedicated industry groups, the firm delivers sector-specific expertisethrough large, cross-functional teams on a global basis.

BUILT FOR THE MIDDLE MARKET

UNITED STATES175+ professionals17 offices

Boston Burlington Chicago Dallas Denver Detroit Houston Los Angeles New York Orange County Philadelphia Richmond San Diego San Francisco St Louis Tampa Washington DC

INTERNATIONAL450+ professionals

60+ offices in 40 countries

Asia: China India Japan Latin America: Argentina Brazil Chile Colombia Mexico Peru

Africa: Congo Egypt Ghana Ivory Coast Mauritius Morocco Senegal South AfricaEurope: Belgium Bosnia Croatia Czech Republic Finland France Germany Herzegovina

Hungary Ireland Italy London Netherlands Norway Poland Russia Serbia Slovenia Spain Sweden Switzerland Turkey United Kingdom

specialty chemicals continue to see strong growth …

Documents