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HIGHLIGHTS — M&A activity remains fairly stable in both sectors. Two

announced life sciences deals in HY1 2017 crossed the $20 billion mark.

— Medtech accounts for 509 announced deals, of which six rank among the top 10 life sciences announced deals.

— Transactions in chemicals spread across the value chain, with further consolidation expected in specialty chemicals.

— US and China remain the most active countries in both sectors.

— KPMG’s Deal Thermometer indicates that the environment for M&A activity will remain moderately strong in both life sciences and chemicals.

DEAL THERMOMETER HY1 2017KPMG’s Deal Thermometer signals the environment for M&A deals in chemicals and life sciences. It combines the appetite for deals (changes in forward P/E ratios) with the capacity to fund deals (changes in Net Debt/ EBITDA multiples). ‘Hot’ signifies an environment conducive to deal-making.

DEAL APPETITE (Forward P/E ratio)

Sources: Capital IQ, KPMG Analysis Sources: Capital IQ, KPMG Analysis

DEAL CAPACITY(Net debt/EBITDA)

DEAL APPETITE (Forward P/E ratio)

DEAL CAPACITY(Net debt/EBITDA)

30 Jun 2016

16.3 17.1

30 Jun 2017

5%

1.0x

0.6x

34%

30 Jun 2017

30 Jun 2018

1.1x

30 Jun 2016

14.6 15.0

30 Jun 2017

3%

30 Jun 2017

1.5x

30 Jun 2018

Deal CapsuleTransactions in Chemicals & Life Sciences

July 2017

LIFE SCIENCES CHEMICALS

26%

A strong start to 2017 and high stock market valuations are encouraging chemical companies to drive further consolidation, particularly in coatings and specialty chemicals.

VIR LAKSHMAN | HEAD OF CHEMICALS & PHARMACEUTICALS, KPMG IN GERMANY

“ ”

Deal Value in $ bn. Number of Announced Deals

2011 2012 2013 2014 2015 2016 HY1 2016 HY1 2017

1,920 1,840 1,8302,130

2,449 2,530

1,223

143153 119 152 610 265597

FIGURE 2: TRENDS IN CHEMICALS M&A

FIGURE 1: TRENDS IN LIFE SCIENCES M&A

Sources: Thomson One, KPMG Analysis



1,136 1,114986

1,117 1,133 1,151

578 534

58 54 42 104 233 153215 66

140

1,231

2011 2012 2013 2014 2015 2016 HY1 2016 HY1 2017

2 | Deal Capsule | July 2017

In life sciences, two announced deals surpassed the $20 billion mark. Medtech represents an aggregated announced deal value of $60 billion, accounting for six top 10 deals. Strategic investors are resorting to M&A to replenish sales from patent expirations. Number of deals and deal value increased slightly by 1% and 2% respectively. US and China were the most active countries.

MEDICAL TECHNOLOGYMedtech is a substantial part of life sciences and projected growth of 5.2% CAGR is expected to lead to a market size of $530 billion by 2022.

In HY1 2017, medtech deals dominated M&A activity in life sciences. Becton, Dickinson and Co. led by announcing the $24 billion acquisition of C.R. Bard, Inc., a well-established medtech company in vascular, urology, oncology and surgical specialty products. In recent years, Bard has expanded its presence beyond the US, especially in emerging markets, where it is ranked among the fastest growing medtech companies.

New Mountain Capital LLC announced the $6.4 billion acquisition of VWR Corp., through its portfolio company Avantor Performance Materials LLC. VWR is a global provider of product, supply chain and service solutions to laboratory and production customers, offering solutions from scientific research services to customized chemical blends. Avantor provides its customers within the life sciences and advanced technology markets with ultra-high-purity materials. The transaction will result in a more diversified combined company, providing solutions along the value chain from research through production.

Cardinal Health Inc. plans to acquire Medtronic PLC‘s patient care, deep vein thrombosis and nutritional insufficiency businesses for $6.1 billion. The deal includes 23 product categories and multiple industry-leading brands with total revenues of $2.3 billion in 2016, of which more than 70% is earned in the USA.

Pamplona Capital Management LLP announced its $5 billion acquisition of PAREXEL International Corp., a leading biopharmaceutical services provider, indicating financial investors’ demand for investments in medtech and services.

Allergan PLC confirmed its M&A-growth, after the completion of the $2.9 billion acquisition of LifeCell Corp. in Q1 2017. Allergan publicized the $2.4 billion deal with ZELTIQ Aesthetics, Inc. shortly after, which will expand Allergan’s global aesthetics portfolio. ZELTIQ’s CoolSculpting System, a proprietary fat reducing treatment, is an advanced technology in the cash-pay body contouring segment of medical aesthetics and is marketed in more than 80 countries.

Life SciencesFIGURE 4: TOP COUNTRIES IN LIFE SCIENCES M&A HY1 2017*

AS TARGETAS ACQUIRER

US CHINA JAPAN UKCANADA S. KOREA INDIAFRANCE GERMANY ITALY

356

388

216197

72 63 70 56 64 51 58 57 52 5236 44

28 3524 30

FIGURE 5: MEDTECH – LEADING COMPANIES

Sources: Company Reports, Evaluate Ltd., KPMG Analysis

28.8

13.2

17.9

25.118.3

Medtronic PLCJohnson & Johnson

Fresenius Medical Care AG & Co. KGaASiemens AG

Thermo Fisher Scientific Inc.General Electric Co.

Danaher Corp.

18.3

14.2

FIGURE 3: MEDTECH – WORLDWIDE SALES

Sources: Evaluate Ltd., KPMG Analysis

2015 2016 2022

371 392 530

CAGR: 5.2%

11.312.4Cardinal Health Inc.

Becton, Dickinson and Co.

Stryker Corp.

12.5

* Number of announced dealsSources: Thomson One, KPMG Analysis

Company Global MedTech Sales in $ Bn., 2016

Worldwide MedTech Market Sales in $ Bn.

© 2017 KPMG AG Wirtschaftsprüfungsgesellschaft, a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Germany. The KPMG name and the logo and are registered trademarks of KPMG International.

July 2017 | Deal Capsule | 3

PHARMACEUTICAL PATENT EXPIRYThe pharmaceutical industry is expected to continue its course of growth with an estimated compound annual growth rate of 5.4% to 2022. However, several patents will expire in this period. It is expected that approximately $192 billion sales are at risk between 2017 and 2022. Eli Lilly and Co. lost US patent protection for its attention-deficit hyperactivity disorder (ADHD) drug Strattera in May, which generated sales of more than $0.5 billion in the US in 2016. By the end of May 2017, various competitors have already obtained approval by the FDA for a generic drug, among them Teva Pharmaceutical Industries Ltd. Eli Lilly responded through the completion of two top 10 deals in Q1 2017, namely CoLucid Pharmaceuticals Inc., a pain management company and animal health vaccines assets of C.H. Boehringer Sohn AG & Co. KG with an aggregated transaction value of $1.9 billion.

Fresenius sets future course

Fresenius Kabi AG, part of Fresenius SE & Co. KGaA, announced the $4.8 billion acquisition of Akorn Inc., a pharmaceutical company that develops, manufactures and markets generic and branded prescription pharmaceuticals. With more than 80 Abbreviated New Drug Applications filed and pending, Fresenius expects to boost its pipeline. Akorn’s products in admission procedures will address a market volume of $9.3 billion. With its diversified portfolio of more than 180 products, including ophthalmic, injectable and niche sterile and non-sterile pharmaceuticals, Akorn increased its revenues by 13% in 2016.

Fresenius’ €0.7 billion acquisition of the biosimilar business of Merck KGaA includes the entire product pipeline with a focus on oncology and autoimmune diseases. High triple-digit million sales are expected from 2023 onward. The estimated purchase price comprises a €170 million upfront payment and further potential milestone payments estimated at €500 million.

CAPITAL INDEXAfter a decline at the beginning of HY1 2017, the MSCI World Pharma, Biotech & Life Sciences Index has outperformed the MSCI World Index by approximately three percentage points. Johnson & Johnson performed strongly with an 18% share price increase after the announced acquisition of Actelion Ltd. at the end of January 2017.

2011 2012 2013 2014 2015 2016 20172008 2009 2010 2018 2019 2020 2021 2022

Sources: Bloomberg, KPMG Analysis

FIGURE 7: DEVELOPMENT OF LIFE SCIENCES SHARE PRICES HY1 2017

(Expected) sales lost in $ bn.

3

FIGURE 6: WORLDWIDE SALES AT RISK FROM PATENT EXPIRATION

Sources: Evaluate Ltd., KPMG Analysis

4

5

4

7

4

6

4 4 4

2

5

2

5

18 12 24 12 29 13 34 20 52 37 31 24 31 20 48 15 52 14 33 23 31 19 41 19 17 17 21 14 49 13

7

JAN MAR

110

115

120

95

100

MAYFEB APR JUN

% Market at risk

MSCI WORLD INDEXMSCI WORLD PHARMA, BIOTECH & LIFE SCIENCES INDEX

Total sales at risk in $ bn.



NUMBER OF DEALS

1 All numbers are in US$ billion Financial investors are italicized Figures in green are estimated values


Life Sciences$ 96.7 billion

The deal value of the global top 10 announced deals in HY1 2017 was

BIDDER TARGET THERAPY AREA DATE OF ANNOUNCEMENT DEAL STATUSTOTAL

VALUE1

Johnson & Johnson Actelion Ltd. Pulmonary arterial hypertension 26 Jan 2017 Completed 30.0

Becton, Dickinson & Co. C.R. Bard, Inc.Vascular, urology, oncology, and surgical specialty products

23 Apr 2017 Pending 24.0

Thermo Fisher Scientific Inc. Patheon N.V. Contract development and

manufacturing 15 May 2017 Pending 7.2

New Mountain Capital LLC VWR Corp.Wholesaler of laboratory products, services and solutions

5 May 2017 Pending 6.4

Cardinal Health Inc.Medtronic PLC – patient care deep vein thrombosis & nutritional insufficiency business

Patient care deep vein thrombosis and nutritional insufficiency

18 Apr 2017 Pending 6.1

Cinven Partners LLP and Bain Capital LP STADA Arzneimittel AG Generics, OTC 12 Feb 2017 Rejected 5.6

Takeda Pharmaceutical Company Ltd. ARIAD Pharmaceuticals Inc. Oncology 9 Jan 2017 Completed 5.2

Pamplona Capital Management, LLP PAREXEL International Corp.

Clinical research, consulting, medical communications and technology solutions

20 Jun 2017 Pending 5.0

Fresenius SE & Co. KGaA Akorn, Inc. Generics and branded prescription drugs 7 Apr 2017 Pending 4.8

Allergan PLC ZELTIQ Aesthetics, Inc.Medical technology products for fat-reducement

13 Feb 2017 Completed 2.4

TABLE 1: GLOBAL TOP DEALS ANNOUNCED IN HY1 2017

FIGURE 9: LIFE SCIENCES ANNOUNCED DEALS BY CATEGORY HY1 2017*


FIGURE 8: LIFE SCIENCES ANNOUNCED DEALS BY SIZE OF TRANSACTION HY1 2017*

>$500 million - 1 billion$50 - 500 million<$50 million>$1 billion

109

433

16 19

PharmaceuticalsMedical technology

BiotechPlant sciences

322

394

DEAL VALUE IN $BN

60

6

34

49

* Includes deals with a disclosed deal value. * Includes all deals, with disclosed and undisclosed deal value.

509NUMBER OF DEALS




BIDDER TARGET BUSINESS AREA DATE OF ANNOUNCEMENT DEAL STATUSTOTAL

VALUE1

PPG Industries, Inc. Akzo Nobel N.V. Paints, coatings and specialty chemicals 9 Mar 2017 Withdrawn 28.8

Clariant AG Huntsman Corp. Specialty chemicals 22 May 2017 Pending 10.0

Stone Canyon Industries, LLC Mauser Group N.V. Packaging technologies 7 Feb 2017 Completed 2.3

International Petroleum Investment Company Williams Olefins LLC Polymer grade ethylene

and propylene 17 Apr 2017 Pending 2.1

MBK Partners Ltd.Daesung Industrial Gases Co., Ltd. (Goldman Sachs-led consortium 2)

Industrial gases 24 Feb 2017 Completed 1.8

China Petroleum & Chemical Corp. (Sinopec)

Shanghai SECCO Petrochemicals Co., Ltd. (50%)

Olefins, polymers and other derivatives 27 Apr 2017 Pending 1.7

FMC Corp. DuPont Corp. – crop protection business Crop protection 31 Mar 2017 Pending 1.6

Vitol Holding B.V. OMV Petrol Ofisi Holding A.S. (Part of OMV AG) Petrochemicals 3 Mar 2017 Completed 1.5

Pacific Alliance Group Ltd. Yingde Gases Group Co., Ltd. Industrial gases 1 Mar 2017 Completed 1.5

Henkel AG & Co. KGaAGCP Applied Technologies Inc. – packaging technologies business

Sealants and coatings for packaging 2 Mar 2017 Pending 1.1

TABLE 2: GLOBAL TOP DEALS ANNCOUNCED IN HY1 2017

1 All numbers are in US$ billion Financial investors are italicized Figures in blue are estimated values


ChemicalsThe deal value of the global top 10 announced deals in HY1 2017 was $ 52.4 billion

* Includes deals with a disclosed deal value. * Includes all deals, with disclosed and undisclosed deal value.

>$500 million - 1 billion$50 - 500 million<$50 million

FIGURE 10: CHEMICALS ANNOUNCED DEALS BY SIZE OF TRANSACTION HY1 2017*

>$1 billion

50

203

4 10

FIGURE 11: CHEMICALS ANNOUNCED DEALS BY CATEGORY HY1 2017*

Industrial organic and inorgangic chemicalsPaints, varnishes and lacquers

Rubber and plastics productsAgricultural chemicals

Other

34

226

119

104

51

NUMBER OF DEALS

DEAL VALUE IN $BN

29

7

5

223

NUMBER OF DEALS

Sources: Thomson One, KPMG Analysis Sources: Thomson One, KPMG Analysis



Deal focus was widely spread across the value chain with China and USA as the most active countries. The number of announced deals in HY1 2017 was 8% lower than the prior period while the decline in value of announced deals was largely attributable to the inclusion of the Bayer-Monsanto transaction in HY1 2016.

CONSOLIDATION IN SPECIALTY CHEMICALSIn HY1 2017, specialty chemicals indices outperformed the chemicals market by almost 10 percentage points, encouraging M&A. The largest agreed deal was the announced $10 billion all-stock merger of equals between Huntsman Corp. and Clariant AG. With combined sales exceeding $13 billion, the merged company, HuntsmanClariant, moves into the top ranks. A value creation of more than $3.5 billion is projected, through annual cost synergies of over $400 million. With more than 2,100 people working in R&D and more than 10,000 patents, innovation is expected to drive future growth. The merger is targeted to close by the end of 2017.

US M&A ACTIVITY US acquirers keen on Germany and NL

In addition to domestic acquirers, the German chemical industry has predominantly attracted US acquirers over the

past ten years. US deal appetite has markedly increased over the past 12 months.

Praxair Inc. and Linde AG announced a $35.2 billion merger in Q4 2016, intending to create one of the world’s largest industrial gas suppliers with pro forma revenues of $30 billion.

Stone Canyon Industries, LLC (SCI) completed the $2.3 billion acquisition of Mauser Group N.V.. Mauser contributes more than 5,000 employees with 111 manufacturing facilities across 18 countries worldwide to SCI and reinforces SCI’s packaging portfolio.

US investors have also shown interest in Dutch targets, as recently demonstrated by PPG Industries, Inc.’s persistent attempt to acquire Akzo Nobel N.V. After PPG’s third offer of $28.8 billion was rejected on 8 May 2017, PPG withdrew the offer and announced that it will no longer pursue a public offer for Akzo’s shares.

ChemicalsFIGURE 13: TOP COUNTRIES IN CHEMICALS M&A HY1 2017*

AS TARGETAS ACQUIRER


CHINA CANADA GERMANYFRANCEUS JAPAN RUSSIAUKS. KOREA INDIA

123

112 108

35 33 31 3124

1825

14 17 18 16 17 14 14 16

119

12

* Number of announced deals

FIGURE 12: DEVELOPMENT OF CHEMICAL SHARE PRICES HY1 2017

MSCI WORLD INDEXBLOOMBERG SPECIALTY CHEMICALS INDEXBLOOMBERG WORLD CHEMICALS INDEX

100

115

120

110

105

95FEB MAR MAYJAN APR JUN

Sources: Bloomberg, KPMG Analysis

DEAL VALUE IN US$ BILLION


US DENMARK CHINAUKGERMANY CANADA MEXICOIRELANDNETHERL. BELGIUM

39 20 12 1 70 5 16 66 41

1,415

142.1 8.7 7.0 4.4 3.5 2.9

2.6 2.5 2.2 1.5

Figures in light blue: number of completed deals

FIGURE 14: US ACQUIRERS IN THE CHEMICAL INDUSTRY BY TARGET NATION 2007-2016



German acquirers favor US targets

Similar to German targets being of interest to US acquirers, German acquirers lead US inbound deals. Bayer AG demonstrated German deal appetite by announcing their $66 billion landmark acquisition of Monsanto Co. in 2016, which is targeted to close in 2017.

Two deals from German acquirers are amongst the top completed deals in HY1 2017. Evonik Industries AG acquired Air Products & Chemicals Inc.’s performance materials division for $3.8 billion, expecting annual synergies of $80 million, $60 million of which in cost synergies. The transaction increases Evonik’s US presence, lessening the dependency on the European market.

By closing its $2.4 billion acquisition of Chemtura Corp., Lanxess AG significantly broadens its additives portfolio, increasing its US production footprint in the US by doubling the number of sites.

Henkel AG & Co. KGaA’s announced $1.1 billion acquisition of GCP Applied Technologies Inc.’s packaging technologies business represents yet another significant deal with a German acquirer and an US target.

Other US deals

Wholly owned subsidiary of the International Petroleum Investment Company, NOVA Chemicals Corp., announced the $2.1 billion acquisition of Williams Olefins LLC, which owns the majority of an olefins plant located in the US Gulf coast region. The deal enables NOVA to serve its customers’ increasing demand for polyethylene.

A further increase in US M&A activity is expected since the US president’s agenda includes deregulation and lower corporate tax rates.

FINANCIAL INVESTORSFinancial investors have shown a marked interest in the chemicals sector as evidenced by a 41% increase of the number of announced deals between 2012 and 2016. In HY1 2017 approximately 30% of all announced deals were carried out by financial investors.

Financial investors are engaged in three of the top 10 announced chemicals deals in HY1 2017.


DEAL VALUE IN US$ BILLION

US BELGIUM JAPANINDIAGERMANY CANADANETHERL.FRANCE S.ARABIA

49 30 3 26 3 8 56 15 27

1,415

142.1 21.8 14.9 12.7 12.6 7.0 6.94.5 3.4 2.8

Figures in light blue: number of completed deals


FIGURE 17: CHEMICAL ANNOUNCED DEALS BY FINANCIAL INVESTORS

27%


246211

296355 347

179 155

13.1 12.3 18.0 7.2 8.418.6

2012 2013 2014 2015 2016 HY1 2016 HY1 2017

24.4

FIGURE 15: THE US CHEMICAL INDUSTRY AS TARGET BY ACQUIRER NATION 2007-2016

FIGURE 16: NUMBER OF TRANSACTIONS RANKED BY MAIN TARGET AREA WITH US-BASED TARGETS 2007-2016


ACQUIRER US – TARGET US

Chemicals and chemical preparations

Industrial organic chemicals

Chemicals and allied products

Paints, varnishes and lacquers

Industrial inorganic chemicals

Plastics materials and synthetic resins

Adhesives and sealants

Pesticides and agricultural chemicals

Industrial gases

Plastics foam products

195

61

112

200

184

108

96

36

51

35

6485

4744

6452

4232

2513

6022

3119

915

214

112

ACQUIRER INTERNATIONAL – TARGET US

ACQUIRER US – TARGET INTERNATIONAL

N.ZEALAND


The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. Our services are provided subject to our verification whether a provision of the specific services is permissible in the individual case.

© 2017 KPMG AG Wirtschaftsprüfungsgesellschaft, a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Germany. The KPMG name and the logo are registered trademarks of KPMG International.

BASIS OF DATA PREPARATIONValues and volumes used throughout the report are based on announcement date as provided by Thomson Reuters’ database Thomson One as of 30 June 2017, extracted up to and including 03 July 2017, and supplemented by additional independent research. Data available after publication date is incorporated in subsequent editions. This edition presents revised data for the years 2011 to 2016. This report includes disclosed and undisclosed values for M&A transactions including minority stake purchases, acquisitions of remaining interest, and recapitalizations and it explicitly excludes self-tenders and spinoffs. The published numbers of deals and deal values are based on the analysis of target companies which operate in the following subsectors:

Life Sciences

— Medicinal chemicals & botanical products — Pharmaceutical preparations — In vitro and in vivo diagnostic substances — Biotechnology – biological products, except diagnostic

substances — Pharmaceutical wholesale — Medical devices and diagnostics

— Plant sciences

Chemicals — Clay, kaolin, ceramic & refractory minerals — Chemical and non-metallic mineral mining, except fuels — Fertilizers and agricultural chemicals — Industrial gases — Specialty chemicals — Chemical wholesale — Plastics and rubber components

KPMG’s Deal Thermometer is based on financial data as provided by S&P Capital IQ of public companies in the same sector as noted above with a market capitalization at quarter end of at least a $1 billion. For the life sciences sector, this comprises 287 public companies. For the chemical sector, this comprises 202 public companies.

All figures in this report are shown in US Dollars ($) unless otherwise stated.

Sources

Online databases: — Thomson One (Thomson Reuters) — Mergermarket — S&P Capital IQ — Bloomberg

— Evaluate Ltd.

— Various companies’ press releases

Imprint

PublisherKPMG AG Wirtschaftsprüfungsgesellschaft Tersteegenstrasse 19 - 23 40474 Düsseldorf Germany

ContactVir Lakshman * Partner, Deal Advisory Head of Chemicals & Pharmaceuticals, Germany T +49 211 475-6666 [email protected]

Christian Klingbeil Partner, Deal Advisory – Valuation T +49 89 9282-1284 [email protected]

Christian Specht Partner, Deal Advisory – M&A T +49 69 9587-2240 [email protected] AuthorsRita Duran Senior Manager, Deal Advisory Chemicals & Pharmaceuticals, KPMG in GermanyFabian Dingel Chemicals & Pharmaceuticals, KPMG in Germany

Laura Fritsche Chemicals & Pharmaceuticals, KPMG in Germany ContributorsAndy Qiu Partner, KPMG in China * Responsible according to German Law (§ 7 (2) BerlinerPresseG): Vir Lakshman

www.kpmg.de

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