Broker snap: Sector consolidation good for Croda

12th Apr 2010 13:04

There is talk of consolidation in the European consumer care sector, and if this merger activity comes to pass Charles Stanley thinks it could lead to an improved pricing environment, to the benefit of speciality chemicals supplier Croda .The broker reports on rumours that German chemicals giant BASF has approached Cognis, the German company that manufactures a range of oleochemicals and surfactants in the home and personal care sector of the chemical industry."Wire services report that Croda itself might be interested in part of Cognis's operations. Note that Uniqema has now been largely incorporated and the benefits continue to flow from what proved an outstanding acquisition. Croda might now be ready to countenance a further step change and we expect the company to be questioned on this at the forthcoming results," Charles Stanley analyst Jeremy Batstone-Carr said.Croda is scheduled to issue a first quarter update on 28 April."M&A activity across the global chemicals sector has picked up in recent months and we suspect that Croda itself may have fallen under the spotlight as a potential acquisition target. We also note that, as both predator and prey, Croda is rumoured to be weighing up other bid targets," the broker adds.Charles Stanley has an 'accumulate' recommendation on Croda shares.