3

September 2020

CHEMICALSEND MARKET EXPOSURE DICTATES PERFORMANCE

The Chemicals industry has seen a range of impacts from the COVID-19pandemic, greatly varying based on end market. Global Chemicals productiondeclined 7.2% year-over-year (YOY) on a three-month moving average in June,while global capacity remained stable at 75.3%, increasing 2.6% YOY in June,according to the American Chemical Council.1 More recent data suggests theU.S. Specialty Chemicals market has expanded in July, increasing 1.9%, from aprevious +4.6% in June compared to -0.1% and -12.4% declines in May andApril, respectively.2 As economies continue to reopen, downstream demand isexpected to recover, with gains in the U.S. Specialty Chemicals market drivenby cosmetic additives, electronic chemicals, and flavors and fragrances.Weakened downstream demand among Automotive, Construction, andGeneral Industrial markets were partially offset by steady demand for syntheticmaterials for non-wovens in personal protective equipment (PPE),disinfectants, pharmaceuticals, medical plastics, and food and beverageingredients. Oil & gas price volatility eroded the U.S. competitive feedstockadvantage between petroleum-based feedstock naphtha and natural gas-based ethane (see page five), which has since seen the cost advantage return.

Capstone Headwater’s Chemicals index EBITDA multiple has advanced 70.7%from its trough on March 23rd while the DJIA and S&P 500 Industrials indicesrecovered 55% and 59%, respectively, reflecting the resiliency of the industry.

Global merger and acquisition (M&A) activity in the industry fell 3.6% YOYthrough July, with a notable slowdown in May. Buyers have predominantly saton the sidelines as the pandemic swept across the globe, internally focusingon preserving liquidity and assessing operational impacts. However, severalnotable deals, such as INEOS’ acquisition of BP’s Petrochemical business (June,$5 billion) and SK Capital’s acquisitions of Techmer PM and Baker Hughes’Specialty Polymers, present evidence that buyers are returning to the table,albeit with tightened criteria and valuation expectations.

TABLE OF CONTENTS

Industry and M&A Outlook COVID-19 Impacts Segment Highlight Oil & Gas Impact on Feedstocks Notable Transactions Select Transactions Public Company Data Report Contributors Firm Track Record

INDUSTRY AND M&A OUTLOOK

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

Chemicals Industry M&A Volume

Tran

sact

ion

Volu

me

2

Chemicals Industry UpdateEnd Market Exposure Dictates Performance

CONTACTS

David BenchManaging Director949-734-7888dbench@capstoneheadwaters.com

Doug UsiferManaging Director 802-735-2330dusifer@capstoneheadwaters.com

Tracy PatchDirector949-220-0540tpatch@capstoneheadwaters.com

18 1713 13

1915 17

32

13

1915

6

12 11

05

10152025303540

January February March April May June July

2019 2020

-15%

-10%

-5%

0%

5%

10%

15%

20%

2017 2018 2019 2020 2021 2022

Total Chemicals Basic Chemicals Specialties

COVID-19 IMPACTS

Leading public companies have echoed that demand hasbottomed out in Q2, pending the containment of thevirus. Major players have indicated that demand in Julyhas improved in hard hit end markets such as Automotive,Construction, Durable Goods, and other GeneralIndustrial. Chemicals manufacturers with heavy exposureto food, beverage, consumer-driven goods,pharmaceuticals, and sanitation, have remained resilientand partially offset steep declines across other segments.With production near full capacity across the industry,chemical manufacturers have seen the U.S. feedstockadvantage return, albeit at less cost-efficient levels seen inprevious years, following oil & gas price volatility.

The American Chemical Council projects U.S. chemicalsvolumes to decline by 9.3% before rising to 12.3% in2021.3 As the U.S. feedstock advantage strengthens, theU.S. is expected to remain a competitive geography forpetrochemical manufacturing.

3

Chemicals | September 2020

Source:American Chemical Council

% C

hang

e YO

Y

U.S. Chemical Volumes

Company Earnings Highlights

BASF’s Q2 sales declined 12% YOY, driven by volume declines of 11%. Meanwhile, EBITDAdeclined 35%.4 May sales volume declines were prominent in Europe and North America, falling27% YOY while Greater China volumes increased 11% as its recovery accelerated. Over June andJuly, BASF has seen volumes rebound, with continued weakness in Europe. Customers remaincautious, ordering lower volumes more frequently, with 80% of orders expected to be booked inthe next two months. A substantial reduction in demand occurred in Automotive, Energy, DurableConsumer Goods, and Construction end markets. Nutrition & Health and Pharmaceuticals havebeen resilient, posting higher volumes and prices. Notably, aroma, pharmaceutical, nutrition, andhygiene products saw upticks in demand. It intends to close its two disclosed divestitures this year.

IFF experienced a 4% drop in sales, driven by weak demand in Fine Fragrance and Food Serviceingredients (-38% in Q2 YOY).5 The Fine Fragrance and Food Service segments compose 15% oftotal sales, with the remaining percent concentrated in the resilient Food, Beverage, Hygiene, andDisinfection segments. Steady demand in packaged food, beverages, hygiene, and disinfectioncategories generated sales growth of 2% YOY in Q2. IFF has indicated that overall performancehas improved in July, posting low single digit growth with a notable rebound in battered industriessuch as Fine Fragrance and Food Services. IFF’s announced purchase of DuPont’s Nutrition &Biosciences division (December 2019, $26.2 billion), which grew 1% in Q2, is on track to close inQ1 2021. The deal propels IFF to a leading position in the ingredient manufacturing space.

LyondellBasell reported a YOY revenue decline of 39%, EBITDA falling ~60% YOY.6 In response tothe downturn, it aggressively reduced inventory to match lower demand, accelerated capexreductions, decreased discretionary spending, and accelerated cost efficiency initiatives. Despitelower earnings, the company increased cash from operating activities by over $100 million.Declines in demand of intermediates and derivatives, refining products, and advanced polymershave been fuelled by weakness in transportation fuels, automotive manufacturing, construction,and other durable good production. Olefin and polyolefin segments saw an increase in demand,driven by consumer-driven packaging (+20% polypropylene orders) and health care. Thecompany believes demand has bottomed out in Q2, pursuant on the virus, and has experiencedimproved pricing and volume as economies reopen and demand begins to rebound.

Source: Company Earnings Reports

Select Chemicals Public Company Q2 Performance

Actual Projected

0x

5x

10x

15x

20x

25x

30x

EV/E

BITD

A

Brenntag Univar Solutions IMCD

SEGMENT HIGHLIGHT: DISTRIBUTION

4

The global Chemicals Distribution market was valued at $239 billion in 2019, with a pre-COVID projected compound annualgrowth rate of 5.3% to reach $361.3 billion in 2027, according to Grand View Research.7 However, COVID-19 has presentedsignificant disruptions to demand, supply chains, and the normal course of chemical distribution operations. Operators inthe industry have indicated that demand has substantially declined in certain end markets including pockets of the Industrial,Construction, and Automotive industries. Meanwhile, leading chemicals distributors such as Brenntag (XTRA:BNR), Univar(NYSE:UNVR), and IMCD (ENXTAM:IMCD) have indicated that pharmaceutical, food & beverage, personal care, and sanitation& disinfection chemical formulations have displayed demand-resilience, providing offsetting growth to public players toplines. In addition, many public strategics have accelerated digitization to enable a more robust omnichannel customerexperience, as a result of COVID-19.

Date Target Acquirer Deal Highlights

08/03/20 Operating Assets of Suffolk Solutions

Brenntag(XTRA:BNR)

Virginia-based Suffolk Solutions distributes liquid caustic soda (sodium hydroxide). The deal further expands Brenntag’s caustic soda network in the eastern U.S. by strengthening its supply chain, expanding its customer base, and adding flexibility and storage capacity on the east coast. It has access to a bulk terminal and a rail transloading facility in Virginia, with ~$15.6 million in LTM sales.

07/17/20; 04/01/20

Orokia Israel; CosBond

Azelis (EQT-backed)

Azelis, acquired by EQT in 2018, and has announced or completed ten add-ons since EQT’s backing. Notably, Azelis acquired Israel-baed Orokia (July) and Hong Kong-based CosBond (April). Orokia and Cosbond are distributors of specialty chemical products and food ingredients to markets including Personal Care, Food & Beverage, Pharmaceuticals, Nutrition, and Fine Chemistry (consolidated basis).

07/01/20 Holland Chemicals Maroon Group

Holland Chemicals distributes specialty chemicals and ingredients for the Personal Care, Household and Industrial Cleaning, Food, and Industrial industries. The transaction is highlighted in more depth on Page 8 of the report. Maroon Group was acquired by CI Capital in 2014 and has continued to seek add-on acquisitions to bolster its market share, geographic reach, and product offerings.

03/13/20 Dien Lebaronbrown Specialties

Dien, founded in 1996, supplies specialty chemicals and ingredients for applications in Food & Beverage, Nutraceutical, Personal Care, and Pharmaceutical end markets. The acquisition provides Dien with additional resources and commercial relationships to expand its supplier and customer bases. Dien joins Lebaronbrown’s subsidiaries: AIC, Charkit, and Custom Ingredients.

01/17/20 ZIFRONI Chemical Suppliers

IMCD(ENXTAM:IMCD)

IMCD, a leading distributor of specialty chemicals and food ingredients, acquired ZIFRONI Chemical Suppliers, a distributor of pharmaceutical, personal care, and other specialty chemical ingredients in Isreael. ZIFRONI was founded in 1950 and generated a revenue of ~$12 million in 2019. The deal follows IMCD’s globalization strategy in its Pharmaceutical business.

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

Notable Chemicals Distribution M&A Deals

Public Chemical Distributor EBITDA MultipleIn Q2, Brenntag (-13.4% revenue, +4% EBITDA)8 andUnivar (-16.5%, -16.6%)9 experienced revenue declines onweakened demand from general industrials, oil & gas,and automotive customers while IMCD reported arevenue increase of 2% and a rise in EBITDA of 8%, YOY.10

Downward demand pressure on each major players’ topline were offset by stronger demand in essential endmarkets (i.e. Pharma, Personal Care, Food Ingredients, andSanitation), also driving improved gross margins withproduct mixes shifting toward high-margin specialtyrather than low-margin commodity or bulk chemicals.

Coronavirus-induced volatility in the public equitymarkets has since seen EBITDA multiples rebound in theChemicals Distribution industry. Compared to March 10,IMCD (+33.9%) Brenntag (+24.6%), and Univar (+15.9)have surpassed pre-COVID multiples while Brenntag andUnivar have nearly reached their previous 2020 high.

Source: Capital IQ as of August 18, 2020

Chemicals | September 2020

-$60-$40-$20

$0$20$40$60$80

$100

OIL & GAS IMPACT ON FEEDSTOCKS

WEST TEXAS INTERMEDIATE CRUDE SPOT PRICE

Supply and demand shocks caused severe price volatility, even driving the price per barrel negative in April.

U.S.

Dol

lars

Per

Bar

rel

Natural Gas prices reached $2.24/Mmbtu at the end of July after spending most of 2020 below $2/Mmbtu.

$/Mmbtu=dollars per million British thermal unitsNote: Year-to-date (YTD) ended August 10 and shaded area indicates post-pandemic declaration

Source: FactSet

$/M

mbt

u

Note: Year-to-date (YTD) ended August 10 and shaded area indicates post-pandemic declarationSource: FactSet

HENRY HUB NATURAL GAS SPOT PRICE

$0$1$2$3$4$5$6$7

5

The Oil & Gas market has faced an unprecedented supply and demand shock in 2020. As the virus swept across the globe, SaudiArabia and Russia declared production increases, inciting a collapse in the price of West Texas Intermediate (WTI) crude oil.Concurrently, global lockdown measures placed substantial downward pressure on oil demand, as consumer driving, commercialair travel, and industrial capacity ceased. The result was a drop in oil demand by 16.4 million barrels per day (b/d) YOY in Q2,according to the International Energy Agency’s July Oil Report.11 Natural gas prices have also experienced headwinds, as thecommodity was hit by COVID-19 amidst a declining natural gas demand, driven by historically mild temperatures in the firstmonths of 2020.

The volatile price of crude oil and downward pressure on natural gas prices have historically impacted the downstream Chemicalsindustry. Petrochemical manufacturers utilize oil & gas derived feedstocks or chemical inputs, naphtha (oil-derived) and ethane(natural gas-derived), to manufacture ethylene used in petrochemical production, resulting in significant exposure to upstreamprice volatility. The coronavirus forced U.S. upstream oil and gas producers to shut down unprofitable production given low oilprices and weak demand. A fall in U.S. ethane supply in 2021 (revised 2021 projection of 2.6 million barrels per day vs. 3 millionb/d), due to pandemic induced shutdowns, is expected to coincide with an increase in demand for ethane as a feedstock frompetrochemical producers, driving a rise in U.S. ethane prices, according to IHS Markit.12 A rise in ethane prices, and acorresponding increase in ethylene prices would produce higher input costs for ethylene-based chemicals. However, as oil pricescontinue to recover, ethane’s advantage over naphtha as ethylene feedstock is expected to persist despite an increase in ethaneprices, commented Veeral Mehta, Executive Director of IHS Markit. The low-cost ethane, which has driven U.S. petrochemicalgrowth, and the associated increase in steam crackers built on the Gulf Coast, will continue to perpetuate the U.S.’s feedstockadvantage over higher costing naphtha-based facilities in Europe and Asia.

Chemicals | September 2020

NOTABLE TRANSACTIONS

6

To Acquire

To Acquire

SK Capital Partners, New York-based private equity firm specializing in Chemicals, Specialty Materials,and Pharmaceutical investments, has agreed to acquire privately held Techmer PM and Baker Hughes’subsidiary (NYSE:BKR) Specialty Polymers in July. The new platform investments are the first for SKCapital’s Catalyst I fund, which targets middle-market chemicals businesses. “We were able to get thesetwo deals done in this challenging environment where we have seen many other transactions over thepast five months simply fall apart. We did this by over-equitising and tapping into close relationshipswith lenders,” commented SK Capital Managing Director, Mario Toukan.13

Techmer PM, a leading designer and producer of engineered compounds and color and additiveconcentrates for Plastics and Fiber Industries, generates over $200 million in annual sales and employsover 600 people.14 Clinton, Tennessee-based Techmer PM specializes in modifying the appearance andproperties of base polymers. The company serves a diverse set of global markets such as Agriculture,Automotive, Aerospace, Building and Construction, Consumer Products, Medical, Material Handling,Nonwovens, Rigid Packaging, and Textile, as well as many OEMs. The company operates sevenmanufacturing plants across North America, collaborating with leading brand owners as well as OakRidge National Laboratory and NASA to develop innovative materials and reinforcements for use incomposites and additive manufacturing.

Specialty Polymers is a producer of specialty low molecular weight olefin polymers, includingdifferentiated functional polymers and high melting point polyethylene waxes with applications inplastics and cosmetic formulations, among others. The company was divested by Baker Hughes whichpredominantly operates in the Oilfield Services market, making the Specialty Polymers business a non-core division with sales under $100 million. “As an independent company, the specialty polymersbusiness will be able to build upon and enhance its reputation as a reliable provider of innovative andhigh-quality polymers,” stated Jonathan Borell, Managing Director of SK Capital.15

The two platform deals were executed under challenging market conditions, with materially largerequity checks than before the downturn. “For both transactions, we paid a fair price - not a discountgiven COVID-19 and the economy,” stated Mario Toukan.

Daicel Corporation (TSE:4202), a Japanese producer of celluloid technologies, organic chemicals, high-performance chemicals, polymers and pyrotechnic devices, has agreed to acquire the remaining sharesof Polyplastics for $1.575 billion.16 Daicel is an existing shareholder (55%) and has agreed to acquire theremaining 45% stake from Celanese Corporation (NYSE:CE), for an enterprise value of $3.5 billion or~2.8x revenue. Celanese intends to monetize a historically passive joint venture investment in order toallocate additional capital to higher growth business divisions. The deal comes after over 50 years in thejoint venture, and with the departure, Celanese Engineered Materials intends to drive growth andcustomer development across overlapping regions where it sees expansion opportunities.

Polyplastics is a leading supplier of polyacetal (POM), polyethylene sulfide (PPS), liquid crystal polymer(LCP), and polybutylene terephthalate (PBT). The company generated ~$1.3 billion in FY19 sales andemploys 2,131 people as of March 2020, according to the company’s acquisition presentation.Polyplastics is a global leader in POM (19% global market share), PPS (13%), LCP (37%), and PBT (8%),Celanese also is amongst the leaders in the respective chemicals suppliers and began to operate asdirect competitors as Polyplastics’ initial focus in Asian markets expanded to Western Europe and NorthAmerica. Following the deal, Polyplastics intends to expand its LCP business in Europe and theAmercias, investing in infrastructure and leveraging the resources of Daicel to develop new productsand diversify into other advanced engineering plastics.

SK Capital Partners To Acquire Techmer PM, LLC and Specialty Polymers division of Baker Hughes(July 2020, Undisclosed)

Daicel Corporation to Acquire Polyplastics, Co., Ltd. (July 2020, $1.575 Billion)

Specialty Polymers Business

and

Chemicals | September 2020

NOTABLE TRANSACTIONS (CONTINUED)

7

To Acquire

To Acquire

Maroon Group, a supplier of specialty chemicals and packaging products in North America, has agreedto acquire Holland Chemicals, a distributor of specialty chemicals and ingredients to the Personal Care,Household and Industrial Cleaning, Food, and Industrial industries. Terms of the deal were notdisclosed. Holland’s management team will continue to actively manage the day-to-day business.

With over 100 years of industry experience, Holland Chemicals supplies acetals, bakery releasecompounds, essential and natural oils, hydrocarbon gels, solvents, silicones, lubricants and rustpreventives, waxes, and surfactants. The company also provides formulation assistance for PersonalCare, Food, Pharmaceutical, Lubricant, Metal Working, Corrosion Inhibitor, and other markets. Based inBurr Ridge, Illinois, Holland Chemicals provides differentiated services through a technical sales model,formulary support and development solutions, and key focus on customer service. The deal providesHolland with substantial opportunities to leverage Maroon’s North American footprint, diverse productofferings, infrastructure, and digital capabilities.

“This transaction is another example of our commitment to targeted aggressive growth, and we’rethrilled to welcome the Holland Chemicals team to Maroon Group,” said Terry Hill, CEO of MaroonGroup. “The business further strengthens our presence in several core end-markets and geographies,and adds depth to our technical and formulary teams,” Hill added.17

BP PLC (LSE:BP.) has entered into an agreement to sell its global aromatics, acetyls, and relatedbusinesses to INEOS AG for a total consideration of $5 billion, composed of $400 million at signing; $3.6billion at close; and deferred payments of $100 million each in March, April, and May 2021 as well as theremaining $700 million at the end of June 2021.18 BP’s Petrochemical business is a major supplier ofINEOS, a leading global chemicals company. The deal reaches BP’s goal of achieving $15 billion indivestments by mid-2021 a year earlier.

BP’s Petrochemical business includes BP’s aromatic and acetyls businesses, including assets, technologyand licenses , as well as related assets. In total, the businesses encompass interests in 14 manufacturingplants in Asia, Europe, and the U.S. which produced 9.7 million tonnes of petrochemicals in 2019. TheAcetyls business produces purified terephthalic acid (PTA), paraxylene (PX), acetic acid, anhydride, andmethanol. In addition, the business produces specialty chemicals such as metaxylene, ethyl acetate, andvinyl acetate monomer.

BP’s divestiture follows its shift away from Petrochemicals. The deal presents significant synergies forINEOS as several of its sites depended entirely on BP for its supply of raw materials. INEOS even statedthat it could be forced to close certain facilities if BP failed to provide the necessary raw materials.INEOS is currently engaged in the production of olefins, olefin derivatives, aromatics, aromaticderivatives, and chlor-alkali. The deal expands its manufacturing capabilities to now include PX, PTA,and acetic acids, segments in which BP is the market leader. INEOS’ existing product portfolio isprimarily used to make plastics while BP’s six sites that produce PX, PTA, and acetic acid are utilized asraw materials for chemical fiber, expanding its end market capabilities into polyester fiber, film, and PETpackaging. The nine sites that produce acetic acid and a range of derivatives expands INEOS’ customerbase into downstream industries such as Food, Pharmaceuticals, Paints, Adhesives, and Packaging.

BP and Invista are the two main producers and holders of PTA production patents, where BP relies onlicensing royalties. If INEOS decides to terminate licensing, new capacity seekers can turn to Invista,capping new PTA capacity additions. Capacities of acetic acid beyond 2022 will depend on INEOS’investment plans, with termination of some BP JVs resulting in global acetic acid capacities to decline.

Maroon Group, LLC to Acquire Holland Chemicals (July 2020, Undisclosed)

INEOS AG To Acquire BP PLC’s Petrochemicals Business(June 2020, $5.0 Billion)

Petrochemicals Business

Chemicals | September 2020

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

07/27/20 Specialty Polymers of Baker Hughes SK Capital Manufactures specialty polymers including low

molecular weight olefin polymers. - - -

07/21/20 Techmer PM SK Capital Produces of engineered compounds and color and additive concentrates for Plastics and Fiber Industries - - -

07/20/20 Polyplastics Daicel(TSE:4202)

Supplies polyacetal, polyethylene sulfide, liquid crystal polymer, and polybutylene terephthalate. $3,500.0 2.8x -

07/17/20 Rovensa Partners Group Develops bionutrition, biocontrol, and crop protection products in Portugal. $1,142.9 2.8x -

07/01/20 Holland Chemicals Maroon Group Distributes specialty chemicals and ingredients for the Personal Care, Household, Industrial, and Food markets. - - -

06/29/20 Petrochemical business of BP INEOS Comprises aromatic and acetyls businesses,

including assets, technology, and licenses. $5,000.0 - -

06/22/20 Epolin Chemicals Chroma Color Develops near-infrared absorbing dyes and thermoplastic components. - - -

06/09/20 Business of LG Chem

Ningbo Shanshan(SHSE:600884)

Comprises LG Chem’s liquid crystal display (LCD) polarizer business. $1,100.0 - -

05/28/20 Alderys Givaudan(SWX:GIVN)

Develops nutrients through rectified biosynthetic routes in France. $27.6 - -

05/14/20 TiZir Titanium & Iron

Tronox(NYSE:TROX)

Produces pig iron pigment and titanium dioxide to ductile iron foundries. $300.4 1.7x 7.0x

04/10/20 Carbone Savoie Tokai Carbon(TSE:5301)

Produces cathodic solutions for the Primary Aluminum industry. $181.8 1.3x 6.4x

03/26/20 Business of Synthomer

Trinseo(NYSE:TSE)

Comprises the vinyl pyridine latex business, an essential ingredient in binders for coating tire cord fabrics. - - -

03/20/20 Cimcool Business of Milacron DuBois Chemicals Manufactures metalworking fluids for Automotive,

Aerospace, and Industrial markets. $250.0 - -

03/16/20 CVC Thermoset Specialties

Huntsman(NYSE:HUN)

Produces specialty chemicals serving the Industrial Composites, Adhesives, and Coatings markets. $300.0 2.6x 10.0x

03/13/20 Dien Lebaronbrown Specialties

Supplies chemical raw materials to Personal Care, Cosmetic, Food, and Pharmaceuticals markets. - - -

03/11/20 National Flavors The Riverside Company

Processes and manufactures flavoring materials for Baked and Confectionary Food industries. - - -

03/02/20 Bayshore Industrial

Ingenia Polymers

Produces specialty compounds, concentrates, and additives for the Plastic Film industry. - - -

02/21/20 Glycom DSM(ENXTAM:DSM)

Develops, synthesizes, and commercializes human milk oligosaccharides used in food products. ~$831.0 10.3x 20.7x

02/18/20 Trient Technologies/Tekra

DelStar (subsidiary of SWM) Converts high-performance films and substrates. $155.0 1.6x ~9.7x

02/05/20 Alpha Coating Technologies

PPG(NYSE:PPG)

Manufactures coatings for industrial applications and heat sensitive substrates. - - -

01/30/20 Business of Nouryon

Celanese (NYSE:CE)

Comprises Nouryon’s redispersible polymer powders business with facilities in Europe and Asia. - - -

01/14/20 Wilshire Technologies

Evonik Industries(XTRA:EVK)

Produces synthetic and natural products for Pharma, Cosmetic, and Specialty Chemicals markets. - - -

01/08/20 U.S. Coatings Seal for Life (Arsenal Capital-backed)

Provides protective coatings for industrial, petrochemical, and oil & gas maintenance applications. - - -

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

SELECT TRANSACTIONS

8

Chemicals | September 2020

PUBLIC COMPANY TRADING & OPERATING DATA

Source: Capital IQ as of August 18, 2020

9

Price % 52 Wk Market Enterprise LTM EV / LTMCompany 08/18/20 High Cap Value Revenue EBITDA Margin Revenue EBITDAAkzo Nobel N.V. $99.94 91.0% $19,315.7 $21,569.8 $9,773.8 $1,371.8 14.0% 2.2x 15.7x

Arkema S.A. $110.31 93.9% $8,428.8 $9,814.4 $9,294.4 $1,601.4 17.2% 1.1x 6.1x

Asahi Kasei Corporation $8.42 68.6% $11,679.0 $16,695.8 $19,523.8 $2,732.3 14.0% 0.9x 6.1x

BASF SE $60.07 69.9% $55,224.8 $80,602.1 $66,030.8 $6,640.8 10.1% 1.2x 12.1x

Bayer Aktiengesellschaft $67.92 72.1% $66,833.9 $109,476.6 $48,929.8 $13,147.6 26.9% 2.2x 8.3x

Dow Inc. $44.71 79.5% $33,135.5 $49,793.5 $39,092.0 $6,347.0 16.2% 1.3x 7.8x

DuPont de Nemours, Inc. $57.00 77.3% $41,828.2 $58,409.2 $20,679.0 $5,362.0 25.9% 2.8x 10.9x

Eastman Chemical Company $71.90 85.6% $9,728.0 $15,404.0 $8,695.0 $1,789.0 20.6% 1.8x 8.6x

Exxon Mobil Corporation $42.43 56.4% $179,403.9 $243,312.9 $213,857.0 $26,890.0 14.8% 1.1x 9.0x

Formosa Plastics Corporation $2.77 79.8% $17,618.3 $17,146.3 $6,226.7 $752.8 12.1% 2.8x 22.8x

LG Chem, Ltd. $582.74 88.9% $42,444.9 $50,219.1 $23,951.6 $2,275.0 9.5% 2.1x 22.1x

LyondellBasell Industries N.V. $68.44 69.2% $22,848.0 $36,032.0 $29,941.0 $4,705.5 15.7% 1.2x 7.7x

PPG Industries, Inc. $118.69 88.3% $28,008.2 $32,953.2 $13,890.0 $2,287.0 16.5% 2.4x 14.4x

SABIC $23.67 84.7% $71,024.8 $71,121.7 $32,505.7 $6,007.4 18.5% 2.2x 11.8x

Sinopec Shanghai Petrochemical $0.23 69.8% $4,646.2 $3,745.0 $13,151.1 $91.7 0.7% 0.3x NM

Mean 15.5% 1.7x 11.7x

Median 15.7% 1.8x 10.0x

Harmonic Mean 6.4% 1.2x 8.4x

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

Chemicals Index Average EBITDA Multiple vs. Major Indices

2x

4x

6x

8x

10x

12x

14x

16x

18x

EV/E

BITD

A

Chemicals Index DJIA S&P 500 - Industrials

Chemicals | September 2020

CHEMICALS REPORT CONTRIBUTORS

10

2019US MIDDLE MARKET INVESTMENT BANK

OF THE YEAR

TURNAROUND AWARDS

2019INVESTMENT BANKING FIRM

OF THE YEAR

INTERNATIONAL AWARDS

2019INVESTMENT BANKING FIRM

OF THE YEAR

2020MIDDLE MARKET

INVESTMENT BANKOF THE YEAR

2020INVESTMENT BANKING FIRM

OF THE YEAR

David BenchManaging Director dbench@capstoneheadwaters.com | 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 Directordusifer@capstoneheadwaters.com | 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 | September 2020

CHEMICALS REPORT CONTRIBUTORS

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Christopher CardinaleVice Presidentccardinale@capstoneheadwaters.com | 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 PatchDirectortpatch@capstoneheadwaters.com | 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 WilsonAssociatejwilson@capstoneheadwaters.com | 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.

Benjamin Kelly Research Analystbkelly@capstoneheadwaters.com | 617-619-3390

Ben joined Capstone Headwaters in 2018 and serves as an Analyst on the Boston Research Team. Heworks directly with senior investment bankers, utilizing data and market analysis to deliver keyindustry insights to C-suite executives. Ben has a primary focus in the Industrial & Manufacturing andBusiness Services sectors. Prior to joining Capstone Headwaters, Ben worked as an intern at TheBaupost Group within its Portfolio Valuation department. Ben earned a BA in Economics fromProvidence College and is a FINRA Series 79 Registered Securities Representative.

Chemicals | September 2020

FIRM TRACK RECORD

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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.

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CONFIDENTIAL

Sanitation Products Provider

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Food Ingredients Distributor

Chemicals | September 2020

CITATIONS

1. American Chemical Council, “Global Chemicals Output Rebounds in June,” https://www.americanchemistry.com/Media/PressReleasesTranscripts/ACC-news-releases/Global-Chemicals-Output-Rebounds-in-June.html, accessed August 20, 2020.

2. American Chemical Council, “U.S. Specialty Chemical Markets Expand In July,” https://www.americanchemistry.com/Media/PressReleasesTranscripts/ACC-news-releases/US-Specialty-Chemical-Markets-Expand-In-July.html, accessed August 20, 2020.

3. American Chemical Council, “Mid-Year Outlook: Declining U.S. Chemical Industry Output, With Potential Rebound in 2021,” https://www.americanchemistry.com/Media/PressReleasesTranscripts/ACC-news-releases/Mid-Year-2020-Chemical-Industry-Situation-and-Outlook.html, accessed August 20, 2020.

4. BASF, “BASF Half-Year Financial Report 2020,” https://report.basf.com/2020/q2/en/, accessed August 20, 2020. 5. IFF, “Q2 2020 Earnings Conference Call,” https://ir.iff.com/static-files/81382ad5-c901-4a49-99d7-61f390d6a4d7,

accessed August 20, 2020. 6. LyondellBasell, “LyondellBasell Reports Second Quarter 2020 Earnings,” https://www.lyondellbasell.com/globalassets/

investors/earnings-release/2020/q2/200729-2q20-earnings-release.pdf?id=28324, accessed August 20, 2020. 7. Grand View Research, “Chemical Distribution Market Size, Share & Trends Analysis Report By Product (Specialty

Chemicals, Commodity Chemicals), By End Use, By Region, And Segment Forecasts, 2020-2027,” https://www.grandviewresearch.com/industry-analysis/chemical-distribution-market#:~:text=The%20chemical%20industry%20produces%20and,or%20sold%20directly%20by%20manufacturers., accessed August 20, 2020.

8. Brenntag, “Q2 Interim Report,” https://www.brenntag.com/corporate/documents/investor-relations/2020/q2_2020/brenntag_q2_2020_en.pdf, accessed August 20, 2020.

9. Seeking Alpha, “Univar Solutions Inc. 2020 Q2 – Results – Earnings Call Presentation,” https://seekingalpha.com/article/4366028-univar-solutions-inc-2020-q2-results-earnings-call-presentation, accessed August 20, 2020.

10. IMCD, “Investors,” https://www.imcdgroup.com/en/investors, accessed August 20, 2020. 11. International Energy Agency, “Oil Market Report – July 2020,” https://www.iea.org/reports/oil-market-report-july-2020,

accessed August 20, 2020. 12. Chemical Week, “US ethane price, demand to rise in 2021,” https://chemweek.com/CW/Document/112421/US-ethane-

price-demand-to-rise-in-2021, accessed August 20, 2020. 13. Independent Commodity Intelligence Services, “SK Capital to build new platforms with Baker Hughes and Techmer PM

deals,” https://www.icis.com/explore/resources/news/2020/07/27/10534292/sk-capital-to-build-new-platforms-with-baker-hughes-and-techmer-pm-deals, accessed August 20, 2020.

14. SK Capital, “With an Eye on Growth, Techmer PM Partners with SK Capital,” https://skcapitalpartners.com/with-an-eye-on-growth-techmer-pm-partners-with-sk-capital/, accessed August 20, 2020.

15. SK Capital, “SK Capital Announces Agreement to Acquire the Specialty Polymers Business from Baker Hughes,” https://skcapitalpartners.com/sk-capital-announces-agreement-to-acquire-the-specialty-polymers-business-from-baker-hughes/, accessed August 20, 2020.

16. Daicel, “Accelerate 2025 Full Acquisition of Polyplastics,” https://www.daicel.com/en/news/assets/pdf/20200720_3.pdf, accessed August 20, 2020.

17. Maroon Group, “Maroon Group Acquires Holland Chemicals,” https://www.maroongroupllc.com/Press/Maroon%20Group%20Acquires%20Holland%20Chemicals, accessed August 20, 2020.

18. INEOS, “INEOS to acquire BP’s global aromatics & acetyls business,” https://www.ineos.com/news/ineos-group/ineos-to-acquire-bps-global-aromatics-and-acetyls-business/, accessed August 20, 2020.

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.

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Chemicals | September 2020

INTEGRATED CRISIS MANAGEMENT SOLUTIONS

BUILD REALIZE SUPPORTGROW

As a firm, we have mobilized our collective resources to deliver an integrated solution to business owners navigating throughthese times. We can help frame your decisions, access capital to protect your position, and provide specialty transactionexpertise to capture opportunities as they arise.

Our full-service capabilities help companies through every aspect of the business, supported by dedicated industry experts,market intelligence, and private equity coverage.

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We specialize in performance improvement and value creation

in difficult situations.

Board Advisory • Strategic Blueprinting• Evaluate Capital Adequacy• Performance Tracking• Management Accountability• Communication

Operational Effectiveness • Cost Structure Management• Operational Assessment• Management Assessment• Sales Augmentation• Organizational Optimization

Crises Management • Turnaround / Interim Mgmt.• Corporate Restructuring• Bankruptcy Protection

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We help manage through new or existing lenders or investors and

secure an optimal solution.

Debt Financing• Bridge / Interim Financing• ABL and Cash Flow Revolvers• 1st and 2nd Lien Term Loans• Subordinated Debt• Sale-Leasebacks

Equity Financing • Growth Equity• Secondary Equity Recaps• Structured Equity• Acquisition Financing• Investor Management

Alternatives • Creditor Mediation• DIP and Exit Financing • Government Support Programs

Mergers & Acquisitions

We can assist opportunist acquisitions, execute sales, and

navigate distressed transactions.

Strategic Acquisitions• Target Identification• Valuation & Structure• Buy-Side Due Diligence• Quality of Earnings• Buy-Side M&A Execution

Sales & Divestitures• Corporate Valuation• Market Assessment• Transaction Readiness• Sell-Side M&A Execution• Asset Divestiture

Distressed Transactions• Business Unit Divestiture• Distressed M&A• §363 Sale

WE ARE ENGINEERED TO MEET THE FULL LIFECYCLE DEMANDS OF PRIVATE COMPANIES

12TO LEARN MORE ABOUT OUR SERVICES AND SPEAK TO A MEMBER OF OUR TEAM CONTACT US.

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Capstone Headwaters is one of the largest and most active independent investment banking firms in the United States. Thefirm has a rich 18+ year history of achieving extraordinary results for middle market entrepreneurs, business owners,investors, and creditors. The firm offers a fully integrated suite of corporate finance services, including merger & acquisition,debt & equity placement, ESOP advisory, corporate restructuring, valuation & fairness opinion, and financial advisoryservices.

Headquartered in Boston, Capstone Headwaters has over 170 professionals across 17 offices in the U.S. with 16 dedicatedindustry groups. Capstone has been recognized consistently as one of the top investment banks to work for and “U.S. MiddleMarket Firm of the Year.”

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