Arkema Pays Up for Ashland’s Performance Adhesives, but We Think It’s Worth It

No-moat Arkema announced an agreement to acquire Ashland’s performance adhesives business for $1.65 billion (EUR 1.4 billion). At first glance, we see this acquisition as roughly value-neutral and don’t expect to make a material change to our EUR 95 fair value estimate. However, we are constructive on the strategic aspects of the acquisition as we think it is positive for moat and stability of Arkema’s cash flow stream, which ultimately may command a higher valuation multiple in the future. Arkema shares closed up 4% while most of its European chemicals peer group traded down on the day. At current levels, the shares look fairly valued.