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Ch em ica l co m p o u n d sThird-quarter 2010 globalchemicals industry mergersand acquisitions analysis

Curat es egg: The

changing dealenvironment

www.pwc.com/ us/ industrialproducts

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Welcome to the third-quarter 2010 edition of

Chemical compounds, PwCs quar terly analysis ofmergers and acquisitions (M&A) in the globalchemicals industry. In addition to a detailedsummary of M&A activity in the third quarter of2010, our special report takes a closer look at aglobal economy characterized by instability and itsimpact on the strategic M&A deal environment. Inan effort to strengthen their core businesses and

expand their footprint, companies are reconsideringforeign investment strategies. And while emergingmarkets offer opportunities to grow, they alsopresent commercial risks and challenges. Like acurates egg, todays economic expectations are amixed bag of good and bad.

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Chemical compounds 1

Todays global economy is like a curates egg. Economicexpectations are good and bad, positive an d negative. Andas the US economys unpredictability generates grea terconcern throughou t the rest of the world, chemicalcompanies are exercising caution as they consider stra tegic

deals in emerging markets where gross domestic product(GDP) growth is high.

The concept of a mixed bag is especially relevant to th echemicals industrys M&A market. On t he positive side, thevolume of deals announced during the t hird quarter of 2010shot up significantly from the previous year, an indicationtha t the global economy is stabilizing. The downside is thatworries about a protracted economic recovery or anotherrecession have many global buyers and sellers taking await-and-see approach to deal making.

Meanwhile, chemical companies continue to focus on their

core business as they look to create t he capital resourcesnecessary to grow in emerging markets. However, thevaluations attached to these emerging market businesses arehigh, resulting in pricing gaps and difficulties closing deals.

Chemical companies are under stakeholder pressure to findgrowth opportu nities. Most commentators predict that theWestern economies will be sluggish for the next severalyears, hence the import ance of investmen ts in Brazil, India,and China; and to a lesser extent Russia the BRICcount ries where GDP growth projections for 2011 rangefrom 4% to more than 9%.1 In add ition to the BRICcount ries, compan ies are looking a t VISTA count ries, which

include Vietnam, Indonesia, South Africa, Turkey, andArgentina, as well as Mexico, which is becoming moreattractive. Despite cash-rich balance sheets and awillingness to invest in an emerging market, many chemicalcorporations are still finding it difficult to expand t heir

Special repo r t :Curates egg: The changing deal environment

presence in these m arkets, par tly due to valuation but alsobecause shareholder visibility and financial transparency in

these count ries are lacking.

Although many companies have rea lized ben efits and richrewards from foreign investment, it ha s come with a certa inamount of risk. While emerging markets offer opportunitiesto grow, they also present commercial risks, such asprotection of intellectual property, compliance with foreignlaws and regulations, fraud and corruption, and culturaldifferences.

And a changing deal environment adds to t he challenges.

Wh ats dr iv ing cha nges in the dea le n v ir o n m e n t?

Chemical companies spent much of the past two yearsfocused on their core business and tailoring t heir businessprocess and structure to become more efficient. As a result,many of these companies have excess cash on their balancesheets. Those willing to hurdle the obstacles that foreigninvestment presents will look to emerging markets to buy upacquisitions tha t are expected to strengthen their corebusiness. An an alysis of the 10 largest global chemicalcompanies (by revenue) shows that t he average amount ofcash on their balance sheets in the m ost recent quarter is

$3.68 billion, up from an average of $2.45 billion twoyears ago.

A curat e and his egg

An English idiom, a curates egg comes from acartoon in the British m agazine Punch in November1895. Over tim e, the phrase curates egg has evolved

to mean something having a mix of good and bad

qualities.

Average cash of chemical companiesQ = most recent quarter reported, Y = one year prior, Y-2 = twoyears prior

1 Source: IMF, PwC forecasts

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

QYY-2

US$billions

S&P 500 Companies

Ten largest global chemical companies

1.78

2.452.37

3.35

2.39

3.68

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2 PwC

Although it appea rs chemical companies have ample cash onhand to finan ce deals, price is a critical component for

success. Higher pr ices typically require furt her assessmentof futu re cash flows so tha t CEOs can be comfortable movingforward with the tran saction. This is especially relevant intimes of economic uncertainty when there is greateremphasis on the assessment of and tolerance for risk. Ascompanies develop and move ahead with aggressive growthstrategies, they must also be focused, d isciplined , anddeliberate in th eir approach. Meanwhile, the currentcompetitive bid process often requires companies to makedecisions without the benefit of full diligence providing anadvantage to t hose companies that can quickly andeffectively assess the impact of certain r isks on the irbusiness case based on prior knowledge and experience.

With many chemical companies focused on u sing M&A tobuild their positions in high-growth regions, those whounderstand emerging markets, and t herefore the risks, willhave a natural advantage.

Caution also affects buyers within em erging marketsseeking to buy low-growth a ssets within the United States orEurope. In t hese cases, skepticism about the true value ofthe asset often derails the deal. Many chemical companiesin emerging markets are waiting to see how t he US andEuropean economies rebound du ring the next two quartersbefore investing. For example, a Chinese chemical companylooking to invest in the United States saw the t arget pr icedrop significantly but continued to h old off on closing thedeal in anticipation of furthe r discounts.

With 2011 GDP projections in the United States and WesternEurope below 3%,2 organic growth for chemical companiesis limited at best. Growth by further reducing costs is not arealistic option; most companies have already taken drasticmeasures to cut costs and improve operating efficiencies.This explains why most global chemical companies see M&Aas the most viable way to meet stakeholder expectations togrow in the curren t economic environment.

Chemical companies tha t have already made a significantinvestment in em erging economies over the past 10 to 20

years are putting plans into place to improve operations andexpand th eir presence to meet booming local demand. Forexample, a European chemical company recentlyannounced plans to d irect nea rly 40% of its capitalexpend itures toward Asia and Latin America by 2012.

Finally, capital markets are more liquid, making financing adea l in the event its needed more accessible than itwas a year ago.

Man aging a changed dea l env i ronm ent

Because of the increased uncertainty, companies arestructuring deals in new ways and handling themdifferently. Specifically, many are avoiding large, stagedauctions, except in cases tha t involve a sizable, high-profileasset. The trend today is toward one-to-one negotiations inoff-market deals, where the buyer proactively identifies andapproaches th e target. This approach allows companies toenter into confiden tial discussions away from mediascrutiny. As a result, cor porat ions looking to divestthemselves of non-core businesses can position them for asale by iden tifying and briefing the potential A list buyers.

In general, chemical companies have become more cautiousand diligent about what they are buying. They no longerfavor diversification as a global M&A theme. Instead,chemical companies are looking for deals that can providenew strategic opportunities, such a s bund ling services tha tprovide t heir customers with solutions rath er than justproducts, a move that could generate higher revenue andprovide opportunity to leverage synergies throughout theirorganization.

More than ever, deals today must fit strategically andcommercially with existing opera tions and d rive synergisticgrowth.

2 Source: IMF, PwC forecasts

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Chemical compounds 3

Perspective:Thoughts on deal activity in 2010

Deal activity in 2010 is in line with ou r expecta tions. Whilethe n umber of deals year to date is up from 2009, we have

seen fund amen tal differences in the type of deal activity.

The graphs and char ts in the following pages show anincrease in the average size of deals in 2010 compared with2009. Beginning in December 2009, we noted aconsiderable uptick in deal activity. This momentum camefrom strategic buyers that em erged from the downtu rn withstrong ba lance sheets and were looking for smaller bolt-onacquisitions for their core businesses. During 2010, we havenoted two changes in th e type of dea l activity. Initially, weobserved a gradual increase in the size of the deals in ourbusiness pipeline. Secondly, we saw an increase in the levelof private equity activity in the dea l processes. The trends

are continuing into the first few weeks of the fourth quarter.

We continue to see deals move forward at a deliberatelyslower pace than they did dur ing the pre-downturn per iod.We believe this is partially driven by extreme cau tionexercised by buyers and lenders an d th e difficulty inassessing the trends in recent financial results. At the

beginning of the downt urn in 2008, the industryexperienced extreme volatility in volumes, raw material

margins, and selling prices. Although overall profitabilitywas down, th e relationship between raw material costs andselling prices resulted in higher contribution margins perunit. This pattern rem ained common through thedowntur n, but as the economy recovers, the supply-demandratio is having a varied effect across segments of thechemicals industry. Some continue to operate u ndercapacity, making it difficult to assess curren t an d forecastedmargins. These issues require increased scrut iny of deta ilsto structure a reliable and accurate valuation mode l.

An additional challenge th at we see going forward will bethe increased n umber of companies searching for good

acquisition candidates. We ant icipate a greate r level ofcompetition in the deal process, and the advantage will liewith the companies that: 1) proactively target acquisitioncandidates and ensure that t hey are on the list of companiesthat will be invited to participate in t he bidding process, and2) a re prepared to move as quickly as possible with well-defined diligence scopes.

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C o m m e n t a r y

Deal act iv ity in th ird-qu ar ter 201 0 h oldsm o m e n t u m

In line with our expectations, deal activity (by number ofdeals) in the th ird quarter of 2010 maintained the pace setin the previous two quarters. Compared with 2009, the fullyear run ra te of deal activity during the first three quartersfor announced deals with a disclosed value is up 20%. Thegeneral improvement in the economy, th e increasedprofitability in the sector, and t he tren d to focus on growingcore operations via bolt-on and complementa ry acquisitionshas continued to d rive M&A activity.

$39 .8 bi ll ion m ega-deal boosts d eal valuein t h i r d q u a r t e r

Deal value in third-quarter 2010 increased significantly withthe pend ing Potash Corp./ BHP Billiton PLC mega-deal, witha value of $39.8 billion ( refer to page 10 for details).

Excluding this deal, the underlying total deal value in thethird quarter is $11.3 billion. The year-to-date 2010 totalvalue a lready exceeds total deal value in 2009. In general,we are starting to see a trend back toward larger deals, withaverage dea l value at $90 m illion in third-quarter 2010(excluding the impact of the a forementioned mega-deal)compared with $82 m illion in 2009. We expect th is upwardtrend in d eal value to continue in line with h igher companyprofitability and as the buzz about M&A activity in thesector continues.

Quarterly deal activity by number of deals(1Q093Q10)

Quarterly deal activity by total deal value(1Q093Q10)

3 3 31

0

15

30

45

60

3Q102Q101Q104Q093Q092Q091Q09

US$billions

At least $500 million but less than $1 billion

At least $1 billion

Total deals with a disclosed value

At least $50 million but less than $500 million

12

8

9 10

18

24

5

1

46

3 3 33236

2 221 1 1 1102

0

100

200

300

400

3Q102Q101Q104Q093Q092Q091Q09

Numberofdeals

Total announced deals w/disclosed value >= $50 million

Announced deals w/disclosed value

Total announced deals

228 2

52

244

295

282

104 1

32

128

261

266

119

125

28

29

22

24

24

89

21

88

10

4 PwC

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Value o f large dea ls in 3Q10 dom ina ted byon e m ega-deal

Three large deals with a value greater than $1 billion wereannou nced in the t hird quarter of 2010, putting the total for2010 at 10 dea ls for a value of $66.6 billion. This value isdominated by the Potash Corp./ BHP Billiton PLC deal,expected to be worth $39.8 billion. Excluding t his deal,large dea ls totaled $27.6 billion for year-to-date 2010, wh ichsurpasses the tota l large dea l value for all of 2009. Thisupturn is consistent with our expectations for M&A activityin 2010 and activity in t he coming periods.

Deal a ctivi ty by typ e of acqu irer

Strategic investors continu e to outpace finan cial investors.Consistent with our expectations, finan cial investor dea lactivity remains lower than d uring the pre-downturn per iod.While the finan cial markets continue to recover, it will take

time for the flow of debt financing to retur n to historicallevels or prove more advantageous to financial investors. Asthe economy improves, we expect to see financial investoractivity on th e sell side as some look to sell investments theywere forced to hold during t he economic downturn. Wecontinue to recommend that companies analyze theport folio of private equ ity investors for poten tial acquisitioncandidates. It can be assumed t hat m any of the companieswill be available for sale in the foreseeable future .

Large deals (20062009, 1Q-3Q10)Value greater than $1 billion (and number of deals in category)

Deal value by type of acquirer (20062009, 1Q-3Q10)Measured by percentage of deal value (actual deal value inbillions, for deals with a disclosed value, shown in chart)

Financial Investors (banks and investment firms)

Strategic Investors

0%10%20%30%40%50%60%70%80%90%

100%

3Q102Q101Q102009200820072006

71.6

13.8

106.6

26.5

60.9

10.7

29.9

4.2

21.0

2.6

8.045.8

5.2

1.9

1

11

1

0

5

10

15

20

25

3Q102Q101Q102009200820072006

5

11

42 2

1114

4

2

3

Numberofdeals

$10+ billion

$510 billion$15 billion

1

Chemical compounds 5

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6 PwC

Reg iona l d i s t r ibu t ion o f th i rd -qua r ter 20 10 dea ls

The third quarter regional distribution of deal activity has been influenced by dea ls in the Asia Pacific region whenreferring to th e num ber of deals and by the Potash Corp./ BHP Billiton PLC dea l when looking at th e distribution of regionaldea ls by value. Increased dea l activity within Asia is expected, with all but one deal announced being within its regionalborders. At t he count ry level, approximately one-third of the deals are cross-border deals with t he ot her t wo-thirds beingdeals within coun try. This level of cross-border deal activity in 3Q10 is consistent with total dea l activity since 2006.

Number of deals (3Q10) by target nation Number of deals (3Q10) by acquirer nationMeasured by number of deals worth $50 million or more Measured by number of deals worth $50 million or more

Value of deals (3Q10) by target nation Value of deals (3Q10) by acquirer nationMeasured by value of deals worth $50 million or more Measured by value of deals worth $50 million or more

77.3%

13.6%

9.1%

19.4%

79.9%

0.7

68.2%

18.2%

13.6%

80.5%

16.9%

2.6%

Asia Pacific North America Western Europe Middle East South America Africa Eastern Europe

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Chemical compounds 7

Deal act iv i ty rem ain s consis tent r egard lesso f eco n o m y

To provide a longer-term perspective of the level of dealactivity, we analyzed the volume and value of deal activityduring t he past 13 years. In contrast to the value oftransactions, which varied substant ially across the period,the volume of transactions was relatively stable, evenduring economic downturns. This is due to a consistent levelof small deal activity in the chemicals indu stry, which isdr iven by companies using M&A as a tool to cont inua llyreposition their business. During periods of economicdowntu rn, large deal volume d rops significantly, redu cingtotal deal value. As the economy continues to recover, weare seeing an uptu rn in the level of large dea l activity, whichis expected to continue for the rema inder of 2010.

13-year comparison deal activity, 1998 to 2010

Totalannualdealvalue($billions)

Totalannualnumberofdeals

0

20

40

60

80

100

120

140

160

0

200

400

600

800

1000

1200

1400

1600

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

YTD

2010

Ann

ualized

Deal value

Number of deals

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Large deals in 2009

Monthannounced Target name

Targetnation Acquirer name

Acquirernation Status

Value of

transactionin US$ bln Category

Feb CF Industries Holdings Inc UnitedStates

Agrium Inc Canada Withdrawn 5.60 Fertilizers &Agricultural

Jan Terra Industries Inc UnitedStates

CF Industries Holdings Inc UnitedStates

Completed 4.07 Fertilizers &Agricultural

Jul Nufarm Ltd Australia Sinochem Corp China Withdrawn 2.29 Fertilizers &Agricultural

Nov Mitsubishi Rayon Co Ltd Japan Mitsubishi Chemical HldgsCorp

Japan Completed 1.91 Commodity

Apr Morton International Inc UnitedStates

K+S AG Germany Completed 1.68 Specialty

Oct Brazilian Renewable Energy Co Brazil ETH Bioenergia SA Brazil Completed 1.39 Commodity

Feb NOVA Chemicals Corp Canada IPIC Utd ArabEm

Pending 0.50* Specialty

*This transaction is included in our data at this value based on data parameters. However, the enterprise value is substantially larger, standing at$2.3 billion when including assumed debt.

Large deals in first-quarter 2010

Monthannounced Target name

Targetnation Acquirer name

Acquirernation Status

Value oftransactionin US$ bln Category

Feb Airgas Inc UnitedStates

Air Products & ChemicalsInc

UnitedStates

Pending 7.47 IndustrialGases

Jan Quattor Participacoes SA Brazil Braskem SA Brazil Completed 4.13 Other

Feb Terra Industries Inc United

States

Yara International ASA Norway Withdrawn 4.10 Fertilizers &

AgriculturalMar Styron Corp United

StatesBain Capital Partners LLC United

StatesCompleted 1.63 Commodity

Feb Fosfertil Brazil Mineracao Naque SA Brazil Intended 1.03 Fertilizers &Agricultural

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Chemical compounds 9

Large deals in second-quarter 2010

Monthannounced Target name

Targetnation Acquirer name

Acquirernation Status

Value of

transactionin US$ bln Category

Jun National Starch LLC UnitedStates

Corn ProductsInternational

UnitedStates

Pending 1.30 Specialty

Jun Albaugh Inc UnitedStates

Makhteshim AganIndustries Ltd

Israel Withdrawn 1.28 Specialty

Jun Cognis Holding GmbH Germany BASF SE Germany Pending 0.86* Specialty

* This transaction is included in our data at this value based on data parameters. However, the enterprise value is substantially larger, standing at$3.8 billion when including assumed debt and certain liabilities. This transacation is not included in references to large deals elsewhere in thisreport.

Large deals in third-quarter 2010

Monthannounced Target name

Targetnation Acquirer name

Acquirernation Status

Value oftransactionin US$ bln Category

Aug Potash Corp of Saskatchewan Canada BHP Billiton PLC UnitedKingdom

Pending 39.76 Fertilizers &Agricultural

Sep JNFL Japan Investor Group Japan Completed 4.75 Other

Aug AWB Ltd Australia Agrium Inc Canada Intended 1.10 Fertilizers &Agricultural

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1 0 PwC

Large dea l sum m ar y for th i rd -qua r ter 2 0 1 0

Potash Corp. of Saskatchewan/ BHP Billiton PLC

BHP Billiton PLC of the UK, a un it of BHP Billiton Ltd.,through BHP Billiton Development 2 ( Canada ) Ltd.,launched a hostile tende r offer to acquire the en tire sharecapital of Potash Corp. of Saskatchewan Inc. (Potash) , aSaskatoon-based potash mining company, for CAD 135.655(USD 130) in cash per share , or a total value of CAD 41.491billion (USD 39.761 billion). The offer was conditionedupon at least 50% of shares being tendered .

JNFL/ Investor Group

An investor group comprised of Tokyo Electric Power Co.Inc., Kansai Electric Power Co. Inc., Chubu Electric PowerCo. Inc., Kyushu Electric Power Co. Inc., Tohoku ElectricPower Co. Inc., Chugoku Electric Power Co. Inc., ShikokuElectric Power Co. Inc., Japan Atomic Power Co. Ltd.,Hokkaido Electric Power Co. Inc., Hokuriku Electric Power

Co., Hitachi Ltd., Mitsubishi Heavy Industr ies Ltd. andToshiba Corp. ra ised its interest to 91.657% from 24.99% by

acquiring 66.667% interest, or 40 million newly issuedshares, in J apan Nuclear Fuel Ltd., a Kamikita, Aomori-based manufacturer and wholesaler of nuclear fuel, for JPY0.01 million (USD 118.82) in cash per share, or a tot al valueof JPY 400 billion (USD 4.752 billion) in cash, in a pr ivatelynegotiated transaction.

AWB Ltd./ Agrium Inc.

Agrium Inc. of Canada definitively agreed to acquire t heentire share capital of AWB Ltd., a Melbourn e-basedprovider of grain managemen t an d m arketing services, via atender offer for AUD 1.5 (USD 1.346) in cash per share , or atotal value of AUD 1.226 billion (USD 1.1 billion), via

scheme of arrangement. Originally, Agrium planned tolaunch an unsolicited challenging offer to acquire the entireshare capital of AWB. Previously, GrainCorp. Ltd. agreed tomerge with AWB.

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Chemical compounds 1 1

Pw C spo tl ight

Results from PwCs 13th ann ual GlobalCEO Survey (2010) showed t hat ch ief

executive officers (CEOs) from largecompanies were more likely than thosefrom smaller companies to complete anacquisition or enter a stra tegic alliance.Leaders of large corporat ions also wereplanning deals and alliances in thecoming year, according to the surveyreleased in Janua ry 2010. And m any ofthese planned transactions wereexpected to be cross-border dealsbecause of the oppor tunities availablein emerging m arkets.

As growing economicinterdependen cies drive more andmore companies to venture beyondtheir own countrys borders to findtheir ideal acquisition candidate, theappeal of cross-border deals willcontinue to grow. The PwC CorporateFinan ce network closes, on average, adeal a day around the globe inmidmarket M&A tran sactions, andmore than 40% are cross-border deals.

Savvy acquirers lear n lessons from

each successful cross-bordertransaction and use that knowledge tonavigate effectively through obstaclessuch as questionable businesspractices, inconsistent bookkeepingmethods, political instability, and poorenvironment al controls. And while thechallenges of cross-border deals differdepend ing on the size of the businessand the count ry, leading companiesconduct deals using essentially thesame processes: establishing thestrategic purpose for each acquisition;

managing and mon itoring employeeengagement; add ressing change

managemen t issues; applying bestpractices for integration; and trackingprogress toward achieving th e desiredcultural end sta te of the new company.3

How Pw C Corp ora teFinance 4 can he lp

PwCs award -winning Corpora teFinance (more commonly known a sInvestmen t Banking in t he US) practiceprovides independent finan cial advice

to corporations, institutional investorsand governmen ts seeking to buy or sellbusinesses, raise new financing, orimprove the efficiency of the fund ingon their balance sheet s. We work tobuild long-term relationships with ourclients by looking out for their bestinterests rather than simply focusingon closing deals. We are independen tof the source offinance, and so wedifferentiate ourselves throughintellectual, not financial, capital.These factors, together with our deepindustrial products sector knowledgeand intern ational network, combine tomake great deals better.

Our international network ofCorporate Finance advisors makes thedifference because:

We have a talented team of morethan 1,000 Corporate Financeprofessionals operating in morethan 60 countries; we can deployour professionals whenever andwherever you are doing deals.

In the past decade, we providedin-depth financial advice on more

than 300 ann ounced deals globallyper year with an average dea l sizeof $135 million. More than 40% ofthose deals were cross-border.

We have extensive industrycapabilities, local marketknowledge, and a proven trackrecord advising both corporateclient s and institu tional investors,all of which reflect our ongoingquest for leading practices.

Thomson Reuters reported thatPwC Corporate Finance completedthe second-highest volume of dealsglobally in the midmarket for the10 years to December 31, 2009.

We can bring the strength of thePwC Corporate Finance network tobear by sourcing acquisitiontarget s globally, including theBRIC countries and otheremerging m arkets.

As experienced dea l makers, we offerintegra ted solutions with full access toPwCs due diligence, t ax, and post-dealprofessionals providing th e full rangeof deal support from identification andstrategic planning to post-mergerintegration.

3 PwC Global Best Practices, Analyze and capitalize on cross-border opportunities

4 Corporate Finance services in the US are performed by PricewaterhouseCoopers Corporate Finance LLC, a registered broker dealerPricewaterhouseCoopers Corporate Finance LLC is owned by PricewaterhouseCoopers LLP, a member firm of the PricewaterhouseCoopers Network,and is a member of FINRA and SIPC.

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1 2 PwC

Ch em ica l com pa n y case stu dy :Sell-side capabilitiesNon-core disposals

Issue A global chemical company based in Europe m ade a strategic decision to sellone of its non-core business units located in the United States but n eeded help

planning, executing, and finalizing the divestment in a m anner to maximizeproceeds. In particular, the client needed assistance finding an appropriateglobal buyer, determining valua tion, and anonymously soliciting interest fromglobal buyers, as well as present ing the non-core business in the best light.Complicating the transaction, the finan cial records of the business to bedivested were integrated into th e finan cial records of the client s otheroperations and needed to be carved out.

Action To help t he client find t he right buyer for its business unit, PwCs CorporateFinance practice conducted a global sales process and contacted more than 50potential buyers in the United States, Canada, Europe, Brazil, South Africa,and Asia; including India, China , and Japan. PwC Corporate Finance assistedin understanding an d positioning the business for sale, acting as the initial

point of contact with t he potent ial buyers, and assisting with the negotiationsaround price and the other major terms in the sale and purchase agreement.The sale process included the negotiation of multiple ancillary supply, tolling,and transition service agreements.

A PwC Transaction Services engagement t eam assisted an d advised th e clientas it drafted separate and accurate financial records for the business unit to bedivested. These financial statements formed t he basis from which potentialbuyers were then asked to submit offers for the business.

Impact The Corporate Finance engagemen t teams sale process yielded n early a dozenindicative offers. Four were from the United States and Canada, four werefrom Asia, and t hree were from Europe. Six of those offers were final. Most of

the offers were from strategic buyers, and the deal was closed with an Indianbuyer for a US asset owned by a European client.

The PwC sell-side diligence information withstood scrut iny from multiplebuyers, and the client was able to successfully achieve its divestitureobjectives. The client sold t he business to a buyer for a price within 3% of thetop end of the PwC Corporate Finan ce teams preliminary valuation range.

Client : Glob alch e m ica l co m p a n y

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Issue A US chemical company wanted to en ter a high-growt h market as a way tomeet stakeholder dem ands to accelerate growth . The client had its sights set

on making an acquisition in China, but ha d limited knowledge of the coun tryand how to find a suitable ta rget. To move its plans for strategic growthforward , the client informed PwC Corporate Finance in the United States of itsglobal acquisition criter ia.

Action PwC Corporate Finance US reached ou t to the globa l Corporate Financenetwork with the acquisition criteria. As a result, PwC Singapore ident ified apotential acquisition ta rget that was based in China an d owned by a privateequity house in Singapore. Due to an existing relationship between PwCSingapore an d the private equity house, the Corporate Finance engagementteam was able to introduce t he US client to t he ta rget on an exclusive basiswithout th e deal going to an au ction. The firms Transaction Services practicein both t he US and China also provided the due diligence services to the

US client .

Impact The US client, which had limited previous exposure or experience in the Asianmarket, was given an opportunity to buy a business in China. The PwCengagement teams assisted in the negotiations, including negotiations onpricing and structure, as well as the due diligence on t he acquisition target.Because the deal was handled as a one-to-one off-market transaction, the clientacquired the Chinese business on an exclusive basis at an acceptable price.

Ch em ica l com pa n y case stu dy :Buy-side capabilitiesAcquisition identification and advice

Client : Globa lch e m ica l co m p a n y

Chemical compounds 1 3

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1 4 PwC

Pw Cs ch em ica ls exp erien ce

Deep ch em icals exper ience

PwC continues to have the leading market share in theindustry. Our Chemicals Industry practice is compr ised ofa global network of more than 2,900 partners and clientservice professionals. Our chemicals team encouragesdialogue on emerging trends an d issues by holdingconferences for industry executives. PwC is also a sponsorof leading industry conferences and frequently aut horsart icles for, or is quoted in, lead ing industr y publications.Our involvemen t with t hese organ izations represen ts PwCscommitment to furth ering industry dialogue with chem icalsindustry leaders. Our professionals are concentrated inareas where the chemicals industry operates today and inthe em erging markets where the industry will operate inthe future.

Quali ty deal profess ion als

PwCs Transaction Services practice, with more t han 6,500dedicated deal professionals worldwide, has th e rightindustry and functional experience to advise you on allfactors tha t could affect t he t ransaction, including market,financial accounting, tax, human resources, operating, IT,and supply chain considerations. Teamed with ourChemicals Industry practice, our deal professionals canbring a unique perspective to your deal, addressing it from atechn ical aspect as well as from a chemicals industr y pointof view.

Global conn ect ion

PwCs Chemicals Industry practice is a par t of an Ind ustrialProducts group that consists of more than 32,000professionals, including approximately 17,000 providingAssurance services, more t han 8,000 providing Tax services,and 7,000 p roviding Advisory services.

North Amer ica & th e Caribbean

5,000 Industrial Products professionals470 Chemicals indu stry professionals

South Amer ica

2,300 Industrial Products professionals235 Chemicals indu stry professionals

Middle East & Africa

1,200 Industrial Products professionals75 Chemicals indu stry professionals

Europe

14,200 Indu strial Produ cts professionals1,040 Chemicals industr y professionals

Asia

8,300 Industrial Products professionals1050 Chemicals industry professionals

Aust ra lia & Pacific Island s

1,300 Industrial Products professionals105 Chemicals industry professionals

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Pw Cs Ch em icals Ind ust ry pr actice

PwCs Chemicals Industry practice is a global network of professionals who provide indu stry-focused Assurance, Tax, andAdvisory services to more than 200 public and private chemical companies. Our leadership team consists of:

Contac t s

US Industrial Products marketing managerGina DockiewiczFlorham Park, NJ, USPhone: 1.973.236.4648E-mail: gina.dockiewicz@us.pwc.com

Germany Chemicals leaderEckhard SprinkmeierMunich, GermanyPhone: 49.0211.981.7418E-mail: eckhard .sprinkmeier@de .pwc.com

France Chemicals leaderStephan e BassetParis, FrancePhone: 33.01.56.57.7906E-mail: stephan e.basset@fr.pwc.com

Central and Eastern Europe Chemicals leaderPawel PeplinskiWarsaw, PolandPhone: 48.22.523.4433E-mail: pawel.peplinski@pl.pwc.com

United Kingdom Chemicals leaderRichard Bunte rLondon, UKPhone: 44.0.191.269.4375E-mail: richard.bunter@uk.pwc.com

United Kingdom Chemicals Transaction Ser vices directorMike ClementsLondon, UKPhone: 44.0.113.289.4493E-mail: mike.clements@uk.pwc.com

Greater China Chem icals co-leaderJean SunBeijing, ChinaPhone: 86.10.6533.2693E-mail: jean.sun@cn.pwc.com

Greater China Chem icals co-leaderXiaogang WangBeijing, ChinaPhone: 86.10.6533.2662E-mail: xiaogang.wang@cn.pwc.com

Chemical compounds 1 5

Global Chemicals leaderTra cey StoverDenver, CO, USPhone: 1.720.931.7466E-mail: tracey.a.stover@us.pwc.com

Global and US Chemicals Tax leaderMichael Bura kFlorham Park, NJ, USPhone: 1.973.236.4459E-mail: m ichael.burak@us.pwc.com

Global Chemicals Advisory leaderVolker Fitzne rFrankfurt, GermanyPhone: 49.69.9585.5602E-mail: volker.fitzner@de.pwc.com

Global Chemicals client service advisorAlison McNern eyNew York, NY, USPhone: 1.646.471.1747E-mail: alison.mcnern ey@us.pwc.com

US Chemicals leaderAnth ony J. ScamuffaPhiladelphia, PA, USPhone: 1.267.330.2421E-mail: ant hony.j.scamuffa@us.pwc.com

US Chemicals Transaction Ser vices d irectorBru ce Chalme rsPhiladelphia, PA, USPhone: 1.410.659.3488E-mail: br uce.chalmers@us.pwc.com

US Chemicals Transaction Ser vices d irectorSimon Brad fordNew York, NY, USPhone: 1.646.471.8290E-mail: simon.bra dford@us.pwc.com

US Industr ial Products directorNeelam Sharma Florham Park, NJ, USPhone: 1.973.236.4963E-mail: neelam.shar ma@us.pwc.com

US Industr ial Products sector ana lystTom HaasFlorham Park, NJ, USPhone: 1.973.236.4302E-mail: thomas.a.haa s@us.pwc.com

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1 6 PwC

Pw Cs globa l Tra n saction Services pr actice

PwCs Tran saction Services pra ctice offers a full range of Tax,finan cial, business, Assurance, a nd Advisory capabilities coveringacquisitions, disposals, private equity, strategic M&A advice,advice on listed compan y transactions, financing, and public/private par tner ships. The team consists of:

Global Transaction Ser vices leaderJohn DwyerLondon, UKPhone: 44.0.20.721.31133E-mail: john .p.dwyer@uk.pwc.com

US Transaction Ser vices leaderMartyn Curra gh New York, NY, USPhone: 1.646.471.2622E-mail: martyn.curragh@us.pwc.com

Europe Transaction Services leaderVolker StrackFrankfurt, GermanyPhone: 49.69.9585.1297E-mail: volker.strack@de.pwc.com

Asia-Pacific Transaction Services leaderChao Choon OngSingaporePhone: 65.6236.3018E-mail: cha o.choon.ong@sg.pwc.com

Pw Cs Research an d Ana lyt ics grou p

Industrial Products Research and Analytics managerSean GaffneyTampa, FL, USPhone: 1.813.348.7461E-mail: sean.gaffney@us.pwc.com

Pw C Corp ora te Fina n ce Global Netw ork

For Corpora te Finan ce services in the US please conta ct:

US Industr ial Products Corporate Finance LeaderPricewaterhouseCoopers Corporate Finan ce LLCRakesh Kotecha + 1.312.298.2895rakesh.r.kotecha@us.pwc.com

For Corpora te Finan ce services outside t he US pleasecontact:

Global Corpora te Finance LeaderChr is Hemm ings + 44.20.780.45703chris.hemmings@uk.pwc.com

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Chemical compounds 1 7

Methodology

Chemical compounds is an ana lysis of dea ls in th e globalchemicals industr y. Deal informat ion was sourced from

Thomson Reuters using the Thomson-defined industrysector of Chemicals and Allied Products for targets, andother selected upstream and downstream industries (e.g.,Oil & Gas, Mining, Drugs, etc.) acquired by companies thatare par t of the Thomson-defined Chemicals and AlliedProducts designation. This analysis includes all mergers andacquisitions for disclosed or un disclosed values, leveragedbuyouts, privatizations, minority stake purchases an dacquisitions of rema ining interest announced betweenJanuary 1, 2006 and September 30, 2010, with a deal statusof completed, intend ed, partially completed, pend ing,

pending regulatory approval, seeking buyer, seeking buyerwithdrawn, unconditional (i.e., initial conditions set forth

by the acquirer have been met but deal has not beencompleted) or withdrawn. Geographic categories generallycorrespond to continen ts with exceptions for Austra lia(included in th e Asia Pacific category), Europe (divided intoWestern an d Eastern categories based upon UN definitions)and the Middle East (defined a s a separate category basedupon US CIA World Factbook). Where the num ber of dea lsis referenced in this ana lysis it means the number of alldeals with disclosed or undisclosed values unless otherwisenoted.

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Visit our chemicals industry website atwww.pwc.com/us/industrialproducts

2010 PricewaterhouseCoopers LLP. All rights reserved. PricewaterhouseCoopers and PwC refer to PricewaterhouseCoopers LLP, a Delaware limited liability partnership, or, as the context requires, thePricewaterhouseCoopers global network or other member firms of the n etwork, each of which is a separate legal entity. This document is for general information purposes only, and should not be used as asubstitute for consultation with professional advisors. MW-11-0104 JP

PricewaterhouseCoopers has taken all reasonable steps to ensure that information contained herein has been obtained from reliable sources and that t his publication is accurate and authoritative in allt H it i t i t d d t i l l t ti th f i l d i If h d i th t i t i i d th i f t t f i l h ld b