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Arsenal Forges Plasticolors and Evonik/Colortrend Into ChromaFlo

Hello and welcome to your late week international coatings industry update, brought to you by SpecialChem. We have a lot of financials and deals in this issue, so let's get started.

New York-based private equity firm Arsenal Capital Partners has made a pair of deals, combining Plasticolors Inc. and the Colortrend business of Evonik Industries AG to create a new firm called Chromaflo Technologies. Arsenal officials said that Chromaflo will be the industry's largest independent global pigment dispersion platform. No purchase price was disclosed in either deal.

Chromaflo will be based in Ashtabula, Ohio, USA where Plasticolors is already based. Plasticolors' CEO Scott Becker will serve as CEO of the new firm. The combination "positions the new company to address the increasingly complex customer technical requirements in a multitude of applications and end markets," Arsenal partner Timothy Zappala said in an April 30 news release.

In financial news, higher raw material costs dented first-quarter profits at chemical and oil company BASF SE even though operations were boosted by the end of fighting in Libya. The company made .72 billion Euros in the first three months of the year, down from 2.41 billion Euros in the same quarter a year earlier. The decline came despite a 6% increase in revenues to 20.59 billion Euros.

BASF, whose products range from catalytic converters and car coatings to insulation foams, said on Friday it still saw sales and operating earnings rising this year as growth would kick in during the second half of the year following year-on-year declines in the first half. "Increased raw material costs could not be fully passed on in all business areas, which put pressure on our margins," CEO Kurt Bock said in a statement.

In facilities news, Eastman Chemical announced that it has completed the retrofit and startup of its non-phthalate plasticizer manufacturing facility in Texas City, Texas, USA. Eastman purchased the former Sterling Chemicals, Inc. plant in mid-2011. The facility, which will primarily produce Eastman 168 non-phthalate plasticizer, will increase the overall capacity of Eastman 168 by approximately 60%. Further capacity increases are possible with minimal investment at the Texas City site as demand for non-phthalate plasticizers continues to grow.

"We are committed to continual growth in our business and are happy to announce the startup of the non-phthalate plasticizer facility in Texas City," said Heidi Barnes, Performance Chemicals and Intermediates segment Oxo and Plasticizers business director. "This additional capacity will allow us to serve the growing demand for non-phthalate plasticizers such as Eastman 168 around the globe."

First, some ephemera. You know that I often poke what I consider to be good-natured fun at "color anxiety" and the hopped-up, marketing driven technology that some coatings companies use to solve this problem with consumers. Up until Sunday, I saw "color anxiety" as a non-problem, created by indecisive baby boomers and their decorators. Imagine my chagrin when I read this story in a Texas newspaper this week.

It seems that a 38-year-old Bryan, Texas, USA man remains behind bars after authorities said he tried to stab his wife with a kitchen knife because she painted a room, documents state. The wife told police her husband was intoxicated and became angry because she painted their daughter's bedroom in a color he didn't agree to while he was gone, according to court documents.

The man then got a large kitchen knife and went toward his wife, who ran to her bedroom, shut the door and called 911, documents state. The husband tried kick in the door, broke it off one of the hinges and stabbed it with the knife, reports state.

The most pitiful aspect of the situation was that the couple's 3-year-old daughter was inside the bedroom with the wife during the incident and their 9-year-old son attempted to restrain his father while he had the knife, police said.

The man was charged with aggravated assault with a deadly weapon, which is a second-degree felony punishable by two to 20 years in prison and a $10,000 fine.

In my humble opinion, if he is guilty, this punishment is far too light for this doofus, and I will never minimize color anxiety again - I won't even put it in quotation marks.

Moving to other deal news, Australia-based paint manufacturer DuluxGroup has offered A$188.4 million for a complete takeover of garage door and cabinet maker Alesco. DuluxGroup already holds almost 20% of Alesco shares, and has offered $A2.00 for each remaining share.

DuluxGroup Managing Director Patrick Houlihan said the acquisition of Alesco would allow the paint company to grow in Australia and New Zealand by playing to its core strengths. The offer from DuluxGroup comes at a 43% premium to Alesco's last traded share price of $1.40.

The majority of the DuluxGroup business would remain focused on home improvements, but across a larger number of products, Houlihan said. Alesco manufactures garage doors under brands including B&D Doors, supplies hardware and components to the furniture making industry, makes chemicals and decorative concrete, and supplies kitchen and laundry appliances.

DuluxGroup owns brands such as Dulux, Selleys and British Paints, and also owns the Selleys Yates garden care business.

The takeover will only proceed if DuluxGroup can obtain at least 90% of Alesco's shares, and if the target confirms its earnings and liabilities. "The offer structure delivers certainty of value to Alesco shareholders at a considerable premium," Houlihan said.

DuluxGroup will fund the takeover with a new loan of $270 million. The paint company has approached the Alesco board to discuss the offer. Alesco has yet to respond.

Back in the USA, Royal Adhesives & Sealants a portfolio company of Arsenal Capital Partners and Extreme Adhesives announced that Royal will acquire Extreme Adhesives. Based in Raymond, New Hampshire, USA, Extreme Adhesives is a supplier of methyl methacrylate, anaerobic and cyanoacrylate adhesives to the assembly, maintenance and repair, and architectural and building markets. The acquisition builds on Royal's platform of adhesives, sealants and coatings and allows clients of both companies to benefit from an expanded range of customized and proprietary solutions.

"We are excited to add Extreme Adhesives' market-leading products to our growing platform, and welcome Extreme's employees and clients to the Royal family," said Ted Clark, CEO of Royal. "As a leading producer of high-performance adhesives, sealants and coatings, we look forward to working with the Extreme team to advance our combined product portfolio and expand our presence in the assembly, maintenance and repair markets."

Timothy Zappala, a Partner at Arsenal Capital said, "Extreme has a long history of innovative service, application methods and product performance in the fast growing assembly, maintenance and repair, and architectural markets and combined with Royal we will expand the sales of their innovative products both nationally and internationally."

Extreme Adhesives' Partners Jim Yeames and Dave Galpin stated, "We are pleased that after spending the last 25 years building our company, that we have found a new owner committed to investing in building the Extreme Adhesives branded products nationally and internationally." Messrs. Yeames and Galpin will continue with the company during the transition and will thereafter become consultants to Royal.

Arsenal Capital acquired Royal in 2010. Shortly after completing that transaction, Royal acquired Para-Chem, another provider of specialty adhesives, coatings and polymers. In 2011 Royal acquired Craig Adhesives, a supplier of ultraviolet light cured adhesives and coatings.

In additional financials, Huntsman Corp's quarterly profit beat Wall Street's expectations as the company benefited from higher prices for chemicals used in insulation and paint. The results show that demand is beginning to pick up in key markets Huntsman serves, including clothing, housing, construction and auto production.

"Notwithstanding certain economic challenges in various parts of the world, I am most optimistic about our earnings potential," CEO Peter Huntsman said in a statement on Tuesday.

The company posted first-quarter net income of $163 million compared with $62 million a year earlier. Excluding a loss from discontinued operations and other one-time items, the company earned 74 cents per share.

Revenue rose 9% to $2.91 billion. Revenue rose 17% to $1.22 billion in the company's biggest unit, polyurethanes, largely due to higher prices and demand for MDI. Needless to say, demand was also strong for titanium dioxide, a white paint pigment. Revenue in the company's pigments unit rose 16% to $424 million. Demand slipped slightly for Huntsman chemical dyes and specialty chemicals.

In research news, a new method increases the surface area of nanowires by "decorating" them with chains of metal oxide or noble metal nanoparticles.

Though science has known for some time that such ornamentation can greatly increase the surface area and alter the surface chemistry of nanowires, engineers at Stanford University have found a more effective method of decorating them that is simpler and faster than previous techniques.

The results of their study were published recently in the journal Nano Letters.

The development, say the researchers, might someday lead to better lithium-ion batteries, more efficient thin-film solar cells and improved catalysts that yield new synthetic fuels.

"You can think of it like a tree. The nanowires are the trunk, very good at transporting electrons, like sap, but limited in surface area," explains Xiaolin Zheng, an assistant professor of mechanical engineering and senior author of the study.

"The added nanoparticle decorations, as we call them, are like the branches and leaves, which fan out and greatly increase the surface area."

At the nanoscale, surface area matters a great deal in engineering applications like solar cells, batteries, and especially catalysts, where the catalytic activity is dependent on the availability of active sites at the surface of the material.

"Greater surface area means greater opportunity for reactions and therefore better catalytic capabilities in, for example, water-splitting systems that produce clean-burning hydrogen fuel from sunlight," says Yunzhe Feng, a research assistant in Zheng's lab and first author of the study.

Other applications such as sensing small concentrations of chemicals in the air - of toxins or explosives, for example - might also benefit from the greater likelihood of detection made possible by increased surface area.

The key to the Stanford team's discovery was a flame. Engineers had long known that nanoparticles could be adhered to nanowires to increase surface area, but the methods for creating them were not very effective in forming the much-desired porous nanoparticle chain structures. Those other methods proved too slow and resulted in a too-dense, thick layer of nanoparticles coating the wires, doing little to increase the surface area.

Zheng and her team wondered whether a quick burst of flame might work better, so they tried it.

Zheng dipped the nanowires in a solvent-based gel of metal and salt, and then air-dried them before applying the flame. In the process, the solvent burns in a few seconds, allowing the all-important nanoparticles to crystallize into branch-like structures fanning out from the nanowires.

"We were a little surprised by how well it worked," says Zheng. "It performed beautifully."

Using sophisticated microscopes and spectroscopes at the Stanford Nanocharacterization Laboratory, the engineers were able to get a good look at their creations.

"It created these intricate, hair-like tendrils filled with lots of nooks and crannies," says Zheng. The bejeweled nanowires look like pipe cleaners. The resulting structure increases the surface many fold over what went before, she says.

Zheng and her team have dubbed the technique the sol-flame method, for the combination of solvent and flame that yields the nanoparticle structures. The method appears general enough to work with many nanowire and nanoparticle materials and, perhaps more important, provides an unprecedented degree of engineering control in creating the nanoparticle decorations.

The high temperature of the flame and brief annealing time ensure that the nanoparticles are small and spread evenly across the nanowires. And, by varying the concentration of nanoparticle in the precursor solution and the number of times the wires are dip-coated, the team was able to vary the size of the nanoparticle decorations from tens to hundreds of nanometers, and the density from tens to hundreds of particles per square micrometer.

"Though more research is needed, such precision is crucial and could bolster the wider adoption of the process," says Zheng.

The Office of Naval Research/PECASE program supported the study.

In other news, PPG Industries officials have announced the relocation and expansion of the Toulouse, France-area aerospace sales office. In addition to housing staff who serve regional PPG transparencies and coatings customers, the larger facility includes a paint spray booth, and a technical laboratory is being completed for transparency engineering analysis starting later in 2012... more about this news

Ecology Coatings, Inc. announced several developments relating to its patent pending GRAS (generally recognized as safe) coating. Ecology also announced that it has engaged Atlanta-based FlexPacknology LLC to support business development activity with food and food packaging companies. Ecology has GRAS patents pending in the United States, Europe and Canada... more about this news

IMCD Malaysia announced the finalization of an agreement to acquire the plastics and industrial chemicals distribution business from Tropichem Sdn Bhd in Malaysia. The agreement will be effective June 1 2012 and will comprise amino & phenolic molding compounds, specialty coatings and engineering plastics... more about this news

And finally, Cytec Industries Inc. announced net earnings for the first quarter 2012 of $53.1 million or $1.14 per diluted share on net sales of $783.3 million. Included in the quarter are several special items that total $6.7 million of net expense after-tax or $0.14 per diluted share and are outlined further... more about this news

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