2.     Public companies are valued at higher multiples than comparably sized private companies.  Again, not a surprise.  There definitely is a premium paid for public companies.  It should be noted that this gap between public chemical company valuations and private chemical company valuations is significant.  Many owners of privately held companies will mistakenly look at values of public chemical companies to gauge the value of their own business.

 

3.     Commodity chemical businesses have a slightly higher median multiple than specialty chemicals.  This is a bit of a surprise, although maybe an aberration given the cyclical peak that seems to be the order of the day in the chemical industry. For this analysis, we looked at the Value Line breakdown of the chemical industry into Specialty Chemicals, Diversified Chemicals and Basic Chemicals.  As can be shown from the chart, the median multiple for Specialty Chemicals was 11.37 and for Commodity Chemicals it was 12.45. 

Note that the overall multiples of Value Line chemical companies are higher than the multiples of our 100+ sample.  This is primarily due to the Value Line list being less than half the size of our overall list as well as the fact that many smaller companies are not in the Value Line list.  It should also be noted that the sample sizes in each Value Line category are smaller and therefore may not represent an accurate reflection of the larger chemical industry picture.

Company	EBITDA Multiple
Aceto	8.94
Agrium	4.12
Air Products	10.25
Airgas	8.71
Albemarle	13.01
Amcol	10.13
Ameron	10.54
Amvac	14.21
Arch	8.89
Balchem	12.39
Cabot	7.18
Calgon Carbon	11.64
Celanese	12.89
CPAC	7.66
Cytec	13.30
Dow	12.45
DuPont	26.72
Eastman	12.93
Ecolab	11.54
Engelhard	10.04
Epolin	4.94
Ethyl	4.53
Ferro	14.97
FMC	7.95
Georgia Gulf	7.36
Great Lakes	12.91
HB Fuller	7.31
Hercules	11.66
Huntsman	11.42
IFF	13.78
KMG	10.18
Kyzen	6.31
LSB	10.54
Lubrizol	19.07
Lyondell	35.04
Methanex	10.94
Minerals Technology	8.69
Mosaic	39.22
Nalco	20.91
Nova	8.60
Omnova	19.26
PCS	14.11
Penford	11.97
PolyOne	8.74
PPG	8.33
Praxair	11.19
Quaker Chemical	9.17
Rohm & Haas	14.15
RPM	9.71
Schulman	6.37
Sensient	9.16
Sherwin Williams	9.46
Sico	6.89
Sigma Aldrich	11.02
Stepan	5.71
Syngenta	10.59
United Guardian	6.29
Valspar	11.59
Wellman	11.91
Westlake	7.44

Caveats.  There are a number of weaknesses in using EBITDA multiples.  For one, EBITDA does not take into account capital spending and therefore does not represent true cash flow.  In addition, using trailing 12 month figures can distort  a multiple if the past 12 months have been unusually good or bad.  It  also may be misleading if the past 12 months is not an accurate indicator of what the future holds for the company.  Another caveat relates to what makes a company  a “chemical” company for the purposes of our analysis.  While most of the time this is clear cut, there are always companies that are not that easily classified or have other businesses outside of chemicals.   For example, Value Line has 3M classified as a chemical company.  Is that  appropriate?  Maybe.

Methodology: EBITDA multiples were calculated as of March 31 and April 1, 2005 and were based on trailing 12 month earnings figures in most cases.  Primary sources were Reuters, Yahoo Finance and company information. Most companies in the survey are US based, with some in Canada and Europe.