Seeking Alpha: Albemarle Pays A Stiff Price For A Premium Asset

I wrote about Rockwood Holdings (NYSE:ROC) in December of 2013 and thought at the time that it was a very high-quality specialty chemical company, with an attractive cost-advantaged lithium business, but an expensive stock. That opinion worked reasonably well until today, as other chemical companies like BASF (OTCQX:BASFY) and Taminco (NYSE:TAM) had been outperforming the shares. That's all moot now, though, as Albemarle (NYSE:ALB) has stepped up with a premium buyout offer for this specialty chemical company.

For Albemarle's part, they're paying up to add a well-run surface treatments business and grab the growth potential of Rockwood's top-notch lithium operations. Paying 14x 2014 pro-forma EBITDA (and more than 11x assuming synergies) is steep, but Rockwood is a unique asset with both strong internal returns and good growth potential leveraged to the developing electric vehicle market.

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Albemarle Pays A Stiff Price For A Premium Asset

Seeking Alpha: FMC Corp's Exceptional Performance Comes At A Cost

There are a lot of really good things about FMC Corporation (FMC). The company's unusual model in agricultural chemicals allows for exceptional margins, and the company's food/nutrition business is a leader in close to two-thirds of its operations. The only fly in the ointment is that investors are well aware of FMC's exceptional growth and its different model, and the valuation on these shares is not low.

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FMC Corp's Exceptional Performance Comes At A Cost

Seeking Alpha: Sirocco Isn't The Deal Canada Lithium Investors Want

Tis the season of tougher times for many mining companies. Thompson Creek (TC) is groaning under the threat of not being able to raise enough cash to complete its expansion plans, Mercator Minerals (OTC:MLKKF) sold itself at a fraction of NAV due to severe funding/cash issues, and even the major players like BHP Billiton (BHP) and Rio Tinto (RIO) are pulling back on their capex and exploration budgets. In that regard, then, there's nothing so particularly strange about Canada Lithium (OTCQX:CLQMF) (CLQ.TO) agreeing to a deal with Sirocco Mining (SIM.TO) that buys them time, breathing room, and cash.

Although arguably necessary, this isn't the deal that investors in Canada Lithium are hoping to see. With a hard rock lithium mining asset in Quebec that could produce over 10% of the world's lithium carbonate, the hope here is that a major lithium producer like Rockwood (ROC), FMC (FMC), or Socieded Quimica y Minera (SQM) steps up and acquires Canada Lithium as a means of diversifying its lithium assets. I believe that's still a viable expectation, and although this is a speculative, high-risk opportunity, the de-risking of Canada Lithium's balance sheet and the prospects for profitable near-term production make this a name worth watching.

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Sirocco Isn't The Deal Canada Lithium Investors Want

Seeking Alpha: Rockwood Is Lean And Mean, But Not Overlooked

After a series of deals, Rockwood Holdings (ROC) management now has the business it says it wanted. In agreeing to sell the ceramics, clay-based additives, and pigments businesses, Rockwood is not only about to be flush with cash, but a company highly focused on and committed to its lithium and surface treatment businesses.

That's perfectly fine with me, as I think there are solid reasons to expect good growth in lithium demand and I believe Rockwood can put surplus capital to work expanding the surface treatment operations through select/precision acquisitions. What's not so fine with me is the valuation. I get that many investors are enamored of what electric vehicle adoption could mean for future lithium demand, but I'm not as excited about an opportunity where I have to pay more than 10x EBITDA just to get today's valuation on the shares.

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Rockwood Is Lean And Mean, But Not Overlooked

Investopedia: Rockwood Gets Its Deal For CeramTec

Rockwood Holdings (NYSE:ROC) hasn't been shy in talking about its intentions to simplify its operations around its high-quality lithium business and is surface treatments business. With Monday's announcement of the sale of CeramTec to a private equity buyer, Rockwood has taken a major step toward that vision. While I would have preferred to see Rockwood keep CeramTec, the company got a good price and should be relatively close to a sale of the titanium dioxide and performance additives businesses, which will free the company to repay debt and pursue M&A to beef up the surface treatments operations.

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Investopedia: Rockwood Has Its Risks, But Also Some Apparent Value

It's hard enough to own a chemical company today, with the volatility in input costs and the wobbly state of the global economy. Factor in a sizable sales exposure to Europe, and it's not exactly surprising that Rockwood Holdings (NYSE:ROC) is off its best levels. Nevertheless, with solid exposure to growth markets like lithium and advanced ceramics, and management's plans to monetize non-core assets actively, these shares may be worth a look for investors that are more aggressive.

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Investopedia: FMC A Three-For-One Chemical Company

In the past couple of years, investors have paid a great deal of attention to the agricultural, industrial and battery markets. FMC Corp (NYSE:FMC) is a relatively rare chemicals company in that addresses all three markets. While FMC has enjoyed a great run already, investors may yet be able to wring even more leverage out of a company that seems to be executing as well as any in its markets. 

Solid Second Quarter Performance
FMC met guidance with a little less than 5% revenue growth in the second quarter. Sales growth was led by the agricultural business (which grew 12%), while the specialty business grew 6%. Reported growth in the industrial category was down 5%, but adjusting for asset/business dispositions underlying growth was more on the order of 7% to the positive.

FMC has seen more than a year of ongoing margin expansion and this quarter was no different. Gross margin grew more than two and a half full points from the year-ago level, and operating income jumped more than 18% for the quarter.


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A123 Needs To Recharge

What is there to say about the high-tech battery sector today? Advanced lithium batteries are still the most likely clean-tech option to get traction in the auto sector, but large-scale rollouts are still off in the distance. In the meantime, investors have certainly turned on the smaller, riskier names in this sector and sent the stocks down while the overall market has done alright. 

The Quarter that Was
A123 once again came up short on the revenue line this quarter, as sales totaled a bit under $23 million. Transportation revenue (which is close to half of the total) was flat sequentially, while consumer revenue and service revenue both grew nicely. The company did not record any electric grid revenue this quarter, and the company shipped 10% fewer megawatts on a sequential basis. 


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