ICIS buys CDI, increases workforce by 15% as others cautious ahead of complex 2021

ICIS moves contrast with cautiousness at S&P Global Inc., owner of Platts, another provider of energy and petrochemical price assessments. Platts froze hiring on concern 2021 would test the financial health of subscribers. The acquisition is the latest sign of consolidation that intensified after 2015.

Image courtesy of Lorenzo Cafaro/Pixabay

ICIS, a unit on London-based RELX plc, bought in mid-July 2020 the Houston-based Chemical Data, (CDI) while at the same time increased its workforce as it opted to expand during Covid-19, Dean Curtis, president and CEO of ICIS, told Reuters Events.

"When you make an acquisition, you don't make it to change the business that you're buying. We're buying the people and the success that they've had. It would be a mistake to fundamentally change that quickly," Curtis said by email.

At ICIS, “we are investing significantly in people across the board and we’ve hired more than 100 individuals during this Covid period across the globe, which is part of our investment in the market and the industry itself,” he added in an email received July 17.

Company profiler Owler lists ICIS employees at 670 as of July 18 and estimates annual revenue at $100 million, according to its website. ICIS own website lists “more than 600” employees. Professional networking site Linkedin describes CDI as a company with under 50 employees.

How and when will ICIS, CDI combine operations

“In the short term we will keep both offices, it is important culturally that the businesses come together,” Curtis added.

“And in the longer term we will be looking at the appropriate high performance environment that fits both teams well and serves us well for the future and the growth that we’re planning and expecting,” he said.

“At the same time, the synergies in the acquisition are good on both sides. ICIS has leading benchmarks in many chemicals, particularly in Europe and Asia, and Chemical Data holds corresponding positions in the U.S. market, which fit very nicely with our portfolio,” he added.

Chemical Data and ICIS cover multiple U.S. petrochemical markets. Both companies provide analysis, and supply and demand forecasts. Both have a customer base that includes producers, converters and other participants.

ICIS is not disclosing transaction details, Curtis said.

Price assessment subscribers under stress

S&P Global Inc. owns Platts, which supplies price assessment for markets including energy and petrochemicals. S&P Global top executives said on April 28 that while information usage increased with the pandemic, risks are also greater.

The financial health “of many of our customers will be tested as the year progresses,” said S&P Global CEO Douglas Peterson during the first quarter earnings call, according to a transcript of the call by The Motley Fool.

“Since the beginning of the year, we have taken over 1,300 negative rating actions, which included rating downgrades, credit watch changes and outlook revision,” he said.

“As of now, it's not our intention to furlough or lay off employees because of Covid-19. We’ll obviously evaluate that as scenarios play out,” he added.

“The oil and gas producers, as well as many of the users, companies like airlines, etc., are also under a lot of stress,” Peterson added.

There are “customers that are already under stress that are approaching us to see if there are ways we can negotiate throughout the year as we look at their contracts, renewals,” he added.

“Selling by the phone, selling remotely is not as easy. Renewals are not as easy. We also have some types of products which require training or installations,” he said.

About 80% of revenue at Platts is subscription-related. Subscription contracts range between one and three years.

Hiring freeze, spending cuts

S&P Global units include ratings agency S&P. Then it has two other businesses that are Platts and a market intelligence division.

Depending on the Covid downturn duration, “2021 will likely be a more challenging year for these two businesses,” said S&P Global’s CFO Ewout Steenbergen.

“We've initiated a global hiring freeze with minimal exceptions. Travel and entertainment expenses have been frozen,” he said. S&P also cut spending on promotional and professional services.

“There are some expenses that will increase due to Covid-19 (…) to set up all our employees to be able to securely work from home, and an increase in bad debt provisions,” Steenbergen added.

S&P already recently shipped 3,000 desktops to employees who didn’t have company laptops.

Analysts have said Covid-19 will impact capital expenditures including chemical projects. Yet technology investment may expand to support trends like work from home, or as a way to use digitalization to be more competitive as margins tighten.

S&P Global will continue strategic investments “in China, in marketplace, in ESG (Risk Atlas) and other technology areas,” Peterson said.

Platts reported first-quarter revenue of $215 million, a 4% on-year increase. Petrochemicals-related revenue accounted for $11 million of that.

Consolidation intensified after 2015

McGraw-Hill Financial bought Virginia-based SNL Financial, which also provided data including for energy, for $2.2 billion in 2015, a year that like 2020 was also marked by high crude price volatility. Many petrochemical prices have a correlation with oil or gas. McGraw-Hill Financial changed its name to S&P Global in 2016.

Other petrochemical price assessments, news and analysis providers, include IHS Markit, a result of IHS and Markit merging in March 2016, just a month after IHS bought OPIS price information.

IHS Markit’s OPIS provides spot coverage of markets including petrochemicals as well as news and analysis. OPIS bought in 2015 LCI Energy to boost gas coverage and Navx, for retail fuel pricing.

Argus Media, where equity firm General Atlantic bought a majority stake in May 2016 as strategic investor for $1.4 billion, also has market coverage that includes petrochemicals price assessments. In 2019 HG announced it planned to invest in Argus but didn't disclose the total amount, according to a report on Oct. 22, 2019 by Private Equity News. The HG website lists Argus among properties but without specifying the ownership stake.

U.S.-based Crain Communications announced in Oct. 2015 the creation of its Global Polymer Group, with several brands including publications, websites and trade shows. One of the brands, Plastics News, started publishing in 1989, with weekly resin pricing reporting since the beginning.

There is also The Plastics Exchange, with products that include polymers price assessment information.

By Renzo PIpoli