By Mark Humphries, Partner at Catalyst Corporate Finance

The third quarter has shown itself to be the most active period for mergers and acquisitions (M&A) in 2013 as companies have taken advantage of opportunities to expand into strategically important end applications, strengthen platforms and integrate supply chains.

Toray acquires Zoltek

Of the 11 deals announced, the one that has grabbed the headlines is Toray Industries’ £364 million acquisition of US-based carbon fibre manufacturer Zoltek (see Toray to purchase US carbon fibre manufacturer Zoltek).

Acquiring Zoltek, which had revenues of US$186 million in 2012, should boost Toray’s share of the global carbon fibre market from 20% to 30%.

Toray’s product set has been focused on regular tow carbon fibre typically used in aircraft applications and this deal provides it with access to the large tow carbon fibre used in wind power and automotive applications.

These are sectors where significant increases in demand are forecast – Mitsubishi Heavy Industries recently announced that it has established an offshore wind turbine joint venture with Denmark’s Vestas Wind Systems and Zoltek is a major supplier to Vestas. (See Vestas and Mitsubishi partner on offshore wind turbines.)

... and Plasan Carbon Composites

Zoltek wasn’t Toray’s only deal during the quarter.

Toray is forecasting sales of carbon fibre to industrial applications like automotive to be double its sales to aerospace applications by 2020 and in July it acquired a 20% stake in Plasan Carbon Composites (PCC) (see Toray acquires share in Plasan Carbon Composites).

Toray is a supplier to PCC, which is the sole US tier 1 supplier of carbon fibre reinforced plastic (CFRP)-based exterior body panels for performance and luxury cars of US automobile manufacturers.

This investment ticks a number of strategic objectives and gives Toray more control over its US supply chain, maintains a distribution channel to US manufacturers and creates a manufacturing and development base for CFRP auto parts in North America.

Private equity

Private equity has also been active during the quarter.

AGC Aerospace and Defense has acquired its fifth business, partnering with The Edgewater Funds to acquire UK-based Tods Aerospace & Defence to strengthen its presence in Europe, Asia and the Middle East (see AGC Aerospace & Defense strengthens composites capabilities with acquisition of Tods), and Cathy Investments acquired composites distributor Umeco Distribution from Cytec (see Cathy Investments acquires Umeco Distribution from Cytec). The business has long-term supply relationships with a number of composites manufacturers including Jushi Group and Cytec.

These deals highlight the positive outlook for the composite sector and the ongoing priority of the large manufacturers to secure capacity and technology along the supply chain as the use of composites across multiple end markets ramps up. This is presenting small to mid-sized manufacturers with attractive opportunities to scale and broaden their end markets. ♦
 


Mark Humphries is a Partner at Catalyst Corporate Finance. Catalyst is an international corporate finance advisor, specialising in company sales, acquisitions, private equity and debt funded management buy-outs.