Arkema Poised to Expand In Africa

South Africa’s adhesives market is set to receive a major boost with the proposed bolt-on acquisition of Permoseal, an adhesive solutions provider by French specialty materials company Arkema Group.

Arkema said in December 2021 the acquirement of Permoseal, currently a dominant player in the manufacture and distribution of adhesives for woodworking, packaging, construction and DIY, is awaiting approval of regulatory authorities with the deal likely to be finalized in the second quarter of 2022.

The 1949-founded Permoseal, which was the first company to launch cold glue in the South African market way back in 1954, is currently known for diverse adhesives, sealants and DIY products such as Alcolin, a brand synonymous with quality DIY products not only in South Africa but also in 12 neighboring countries and selected markets in East and West Africa.

“Leveraging its well-known brands, Permoseal has a strong presence in South Africa’s retail chains, and is the exclusive distributor of the Bostik and Evo-Stik brands in the region,” Arkema said in a statement.

The proposed acquisition of Permoseal, with nearly 400 diverse product offers across different supply chains, comes nearly 23 years after it signed an agreement with Arkema for the Bostik License.

The license allowed Permoseal, with sale estimates of $49.6 million in 2021 from two production plants, to become the exclusive distributor of Bostik in the South African market.

Arkema explains the acquisition of Permoseal, which boasts over 56,000 square meters of production, laboratory and research and development facilities in South Africa, and “its extensive range of high-performance adhesive solutions, will complement Bostik’s offering in the region, strengthening their positions in South Africa’s and Sub-Saharan Africa’s dynamic industrial, construction and
DIY markets.”

Bostik, ranked third in the global industrial adhesives market, was acquired in 2015 by Arkema, one of the French firm’s largest acquisitions in its recent history. Arkema has transformed Bostik into its largest main adhesives division with an estimated annual sale of more than US$ 2.2 billion and operations in more than 50 countries.

Having Permoseal would be an added expansion feat for Arkema, which is building on similar deals in the last several years, such as that of Bostik in 2015 that preceded acquisition of Den Braven, a leader in high performance sealants for insulation and construction in Europe, in 2016. Both Bostik and Den Braven brands are already established in South Africa and the acquisition of Permoseal strengthens Arkema Group’s position, particularly the country’s DIY adhesives market.

Other recent major acquisitions by Arkema Group, through Bostik, include Brazil’s Poliplas, a leader in hybrid-technology sealants and adhesives with sales of around US$11.3 million in the first half of 2021. This was soon followed by the acquirement of Texas-based Edge Adhesives business, which markets custom formulations in fast-growing easy-install window, door and roofing applications. Recently, Arkema announced the acquisition of Shanghai Zhiguan Polymer Materials (PMP), a firm focusing on hot-melt adhesives for global consumer electronics.

The Permoseal deal is happening at a time when South Africa has reported slower growth of key adhesive consuming industries such as construction and automotive due to the COVID-19 pandemic.

Arkema, however, is optimistic the South Africa market and Africa in general if experiencing “strong growing demand in the building renovation market.”

But South Africa’s broader automotive industry’s contribution to the gross domestic product in 2020 was 4.9%, down from 6.4% in 2019, “reflecting the severe impact of COVID-19 on automotive manufacturing and retail as a consequence of the country lockdown restrictions during the year” according to the National Association of Automobile Manufacturers of South Africa.

But the COVID-19 pandemic was a boon for other adhesive-using industries such as packaging especially for healthcare products and consumables purchased online.

For example, the lockdown and restrictions in movement in South Africa and globally triggered demand for e-commerce transactions as online shopping became the new normal.

The trend resulted in a corresponding spike in demand for packaging and DIY products to compensate for the drop in demand from key adhesive consuming institutions such as schools and offices.
According to the US’ International Trade Administration (ITA), South Africa’s online sales between 2019 and 2020 increased by 66% to more than US$1.8 billion.

ITA says clothing and apparel were the top e-Commerce product categories sold online South Africa slightly being data and airtime and online entertainment.

“Groceries saw an increase of 54% from 2019, driven by the pandemic and lockdown restrictions,” ITA said.

The agency says South Africa also saw growth in most food delivery platforms from both grocery and fast food/convenience such as UberEATS and Mr Delivery.

Elsewhere, as the COVID-19 pandemic tightened the grip on South Africa society in early 2020, the country’s Paper Manufacturers Association says the industry’s services and products became more appreciated by consumers, especially retailers.

The Association’s executive director Jane Molony says demand for paper products was not only “limited to hygiene products, but also packaging.”

“Online shopping has become a lifeline for those in quarantine and for those who needed to isolate,” she said, adding “since then, buying your groceries online has become part of our
‘new normality.’

“E-Commerce has increased the demand for packaging to ensure goods arrive safely at their destination, another example yet of how the paper industry is perfectly poised to meet the changing needs in society,” Molony adds.

However, Arkema’s Bostik brand would have to contend with competition from other South Africa-based companies such as Qualichem, which produces Genkem, Bourne and Nova, Pekay Group,

Pratley and Royal Adhesive Industries.

Overall, South Africa has more than 25 adhesives market players, all keen on a slice of the country’s construction, packaging, automotive, high tech and healthcare industries.

But for Arkema, the acquisition of Permoseal “will also enable Bostik to consolidate its position in packaging adhesives, and expand its offering of sustainable solutions for the industrial sector in the South African market.”