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Considerations for the Global Chemicals Amid the COVID-19 Outbreak April 2020 Introduction

Dear Clients and Friends, Firstly, we hope this finds you and your families and well. We recognize that these are uncertain and unprecedented times for you and your families, friends, colleagues, , and investments. All of us are facing unique challenges and threats in this new environment—some of you, quite acutely. In recent weeks, markets have been facing significant volatility due to COVID-19 that is expected to continue for the foreseeable future. Substantial disruptions to operations, supply chains, demand, international trade flows, and travel, along with lockdowns and collapsing prices have occurred—all resulting from the COVID-19 outbreak—and all sectors of the global economy have been impacted, including the chemicals sector. What was a relatively benign low-growth, low-interest-rate environment before the outbreak has morphed into what is expected to be a large-scale, negative-growth shock. Governments are trying to counter the impact by unprecedented financial support programs (e.g. currently, the amount earmarked for cheap business and guarantees by governments in the U.S., Britain, , , and is at least $4 trillion, or a fifth of their outstanding non- financial corporate debt). The near-term outlook for the global is deeply concerning, and uncertainty is likely to persist until the duration and overall impact of COVID-19 can be determined. There is a glimmer of hope, however, as we see the Chinese market getting back to operations and order volumes are selectively increasing again—keeping in mind that China represents 30% of global production and 37% of the global demand, and that a 1% decline in China GDP growth translates into c. 2.5mt lost base chemicals demand.(1) At this point, it is impossible for us to know how long the outbreak and lockdown or the lingering effects on businesses, the economy, and the and M&A markets, will last. However, we are hopeful that recent actions will have the positive effect of “flattening the curve” for new cases in the short term and minimize the impact of business operations. We understand the anxiety created by these uncertain times, and as COVID-19 and the resulting economic consequences continue to evolve, we are here to share our perspective based on our real-time conversations with industry executives and business owners across the chemicals industry as well as our comprehensive views on the M&A and capital markets. Even in far less trying times, our firm specializes in helping clients navigate change and uncertainty. We will continue to be a sounding board for our clients and other market participants as we collectively assess opportunities and challenges in the current environment. We bring to bear a broad range of product and solutions across the capital structures, and we stand ready to discuss the impact and potential opportunities created by this crisis on the industry and your business.

Houlihan Lokey Chemicals Team Contacts

Leland Harrs Martin Bastian Steve Wang Managing Director Managing Director Senior Vice President [email protected] [email protected] [email protected] 212.497.7842 +49 (0) 69 256 246 171 212.497.7807

(1) IHS 2 Market Update (1/2)

Based on multiple touchpoints with sector companies, industry consultants, and sources, the following summarizes some industry perspectives and key developments affecting companies and :

1.1 Weakness in key end markets, such as automotive, , and oil and gas, will increase over the next 12 months, driving low-capacity utilizations. o The PMI indexes as of February/March 2020 of major geographic markets, as well as key chemicals end markets, have fallen in the range of 20% to 50% since the beginning of 2020. o February data signaled widespread disruption across sectors stemming from the COVID-19 outbreak. Eight sectors posted the fastest falls in on record during the month, since the global sector data were first compiled in October 2009. Automobiles and auto parts, construction, metals and , and chemicals registered the strongest rates of decline. o This is also reflected in the respective share price developments of companies in the major end markets (auto minus 26%, construction minus 37%, metals and mining minus 31%, industrial minus 26%, chemicals minus 27%).

2.2 Chemical product supply chains are globally facing pressure. High volatility in inventory levels will filter through to downstream chemicals over the next two quarters and beyond. Crisis planning has included inventory build- up for raw materials that could experience supply chain interruptions from COVID-19. o Manufacturers are taking actions to protect employees and ensure there is business continuity, while distributors are realigning logistics and redirecting shipments towards key supply shortages for critical product chains. o Many of the chemical plants are still running, and white-collar employees operate remotely. o For downstream chemicals companies, the disruption to global supply chains—notably from mainland China and India—is expected to be a further catalyst to the trend toward relocating of fine chemicals production.

3.3 Given the precipitous drop in oil prices and unprecedented oil supply surplus over the last few weeks, the chemicals sector—in particular, the chemicals companies—is facing a “double-whammy” impact to in line with the oil price drop (minus 59% since mid-February).

4.4 In the short term, the oil-price collapse is expected to trigger a sharp and broad decline in the prices of petrochemicals, accentuating the recent trend. o In Asia, naphtha prices hit 18-year lows, while paraxylene (PX) values reached levels not seen since 2008. A similar development has taken place in Europe and the U.S., where chemicals such as ethylene, propylene, and toluene stand at lows not seen since 2008 or earlier. o However, not every market is dropping; some raw materials that are key to fighting the pandemic (e.g. masks, filters, disinfectants, microbial, etc.) are seeing high demand and thus higher prices. o For example, isopropanol (IPA), a key component in the production of hand sanitizers, is in such high demand that IPA prices in Europe and the U.S. have increased in recent weeks—doubling in some instances. o Several manufacturers have taken initiatives, are diverting workforce and production capacity to these areas, and support local communities.

5.5 Estimates for the oil-supply surplus in the first half of 2020 are currently difficult to forecast and range from 770 million to 1.3 billion barrels. Even at the low end, this surplus is more than double the previous record-high surplus of 320 million barrels in the first half of 2015, during the 2014–2015 oil-price collapse (while the global oil demand was still increasing, not falling).(1)

(1) IHS Markit 3 Market Update (2/2)

6.6 Monthly global oil demand from February through May is expected to be as much as 4 million to 10 million barrels per day (c. 4%–10% of total daily demand) fewer than year-earlier levels. o These will be the largest declines in oil demand ever. o Immediate and steep production cuts and international collaboration are selectively taken to somewhat mitigate the impact. o In addition, capex budgets getting revisited and create additional uncertainty over medium-term demand. o Regardless of potential benefits to the competitiveness of oil-derived products such as plastics and synthetic fibers, it is also expected to lead to a short-term drop in chemical demand as companies throughout the chain destock in anticipation of lower prices to come.

77. Since mid-February, share prices are down 8%–45%, whereas the commodity and catalyst chemicals as well as the more leveraged companies have been hit the hardest, and the more defensive subsegments like industrial gases or ingredients fared relatively better (commodity minus 38%, catalysts minus 36%, coatings minus 30%, diversified/industrial chemicals minus 34% vs. ingredients minus 19%, and industrial gases minus 25%). The impact of the COVID-19 outbreak has not yet been fully reflected in EBITDA estimate changes, with the largest earnings revisions to diversified/industrial chemicals and companies. 8.8 So far, selective companies have announced cuts or postponements to dividends and share buy-backs. Many companies have significantly cut back capex spending. However, few have stated exactly how much flow they expect to burn. o Companies are scenario testing adequacy of cash buffers and maximizing liquidity by on lines of credit and evaluating all cash outflows, including capital expenditure programs, labor costs, and debt payments. o Further, lack of vendor financing, unhedged FX risks, and unwinding factoring facilities (among others) need to be taken into consideration as well. 9.9 Due to current market volatility, many opportunistic refinancing transactions have been shelved as issuers and underwriters opt to wait to understand how the financial performance will be impacted and for stable markets. o The direct lending community continues to be a focus as the syndicated market has seen an effective shutdown. o A limited number of unitranche providers will opportunistically invest in new companies with potential for higher return over the long term.

1010. Most firms are foremost focused on their existing portfolio companies, while also seeking opportunities to deploy significant dry powder in their funds to meet liquidity and balance-sheet needs and seek value and dislocation opportunities.

1111. Most of the M&A processes have been put on hold, and new launches have been postponed until there is more visibility on the financial impact of the crisis as well as overall business performance and valuation levels. o As valuations fall and capital gets pricier, we do expect a healthy pipeline of chemicals M&A, particularly non-core and/or underperforming businesses o Some (well-capitalized) companies are also expected to pursue —encouraged by governments—which put the survival of foundering companies (and jobs) ahead of antitrust concerns.

4 Long-Term Market Performance

Historically, chemicals companies have outperformed the broader markets. However, in times of or crisis, the sector is among the first to be impacted, and volatility as well as share price reactions spike. Although shares of chemicals companies had initially materially underperformed the broader market indices in past recessions, in the past few weeks—other than commodity chemicals—shares are broadly in line. While all episodes of economic downturns and market volatility are different in many ways, chemicals sector equities have consistently recovered quicker than many other sectors, and we see no reason why this episode would end any differently. However, the timeline may be different.

Chemicals Share Price Performance

Burst of Dot-Com Bubble Financial Crisis COVID-19 S&P 500(1): (13%) S&P 500(2): (24%) S&P 500(3): (25%) STOXX Europe 600(1): (17%) STOXX Europe 600(2): (30%) STOXX Europe 600(3): (28%) S&P 500 Chemicals(1): (4%) S&P 500 Chemicals(2): (18%) S&P 500 Chemicals(3): (28%) FTSE Europe (Chem.)(1): (22%) FTSE Europe (Chem.)(2): (12%) FTSE Europe (Chem.)(3): (25%)

Indexed share price Oil price in development(4) 2014–2015: $/barrel 600 Oil price collapse 150 575 550 525 500 125 475 450 425 400 100 375 350 325 300 75 275 250 225 200 50 175 150 125 100 25 75 50 25 0 0 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Jan-18 Jan-20 S&P 500 S&P 500 Chemicals (Industry) STOXX Europe 600 Index FTSE Europe Index—Chemicals Crude Oil (Brent) Recessionary Period

Source: S&P Capital IQ as of 03/27/2020 (1) Relative performance for calendar year 2001 (2) Relative performance for calendar year 2008–2009 (3) Relative performance since 02/17/2020 (4) Indexed as of 01/01/2000 5 Performance of Selected Chemicals End Markets

Weakness in key end markets, such as automotive, construction, and chemicals, will increase over the next 12 months, driving low capacity utilizations.

Select Chemicals End Markets PMI Output (Feb ‘20) (vs. PMI Dec ’19) Stock Mkt. Perf.(1)

20 25 30 35 40 45 50 55 60 Since Jan-20

Pharma- 55 2% (15%) ceuticals

Construction 51 2% (37%) Materials

Household and 43 (14%) (10%) Personal- Use Products

Industrial 43 (12%) (26%) Goods

(18%) (27%) Chemicals 41

Metals and 40 (20%) (31%) Mining

Automobiles 39 (17%) (26%) and Parts

Regional PMI Output(2) 28 31 41

Note: PMI = Purchasing manager index Source: IHS Markit, Bloomberg (1) Utilizes MSCI world index (2) Current PMI Output data for U.S. and Europe (as of March) and China (as of February) 6 Chemicals Public Market Sentiments

Over the last few weeks, a significant sell-off in chemicals shares occurred across all subsectors exacerbated by the precipitous drop in oil price. Only a handful of companies’ shares are still in positive territory on a LTM basis.

Share Price Performance Over the Last Five Years(1)

Diversified/Industrial Chemicals Industrial Gases/Catalysts Coatings/Construction Chemicals Ingredients Oil Price

120 2 3 4 5 (19%) 100 (29%) 80 (30%) 60 (32%) 40 6 (36%) 20 17-Feb-20 28-Feb-20 10-Mar-20 21-Mar-20 (59%) 250 +40%

200 +4%

150 +1%

100 (19%) (36%) 50 1 (56%) 0 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18 Sep-18 Mar-19 Sep-19 Mar-20 1 17-Nov-19: First-known case of COVID-19 in China 2 3-Mar-20: Federal Reserve lowers interest rates by 0.5% 18-Mar-20: ECB purchases bonds worth €750 billion to calm down sovereign debt 3 9-Mar-20: Italy imposes a national quarantine 4 markets 5 26-Mar-20: U.S. Senate passes $2 trillion rescue package 6 27-Mar-20: Germany puts together a rescue package worth €156 billion LTM Share Price Performance(2)

Diversified/Industrial Chemicals Commodities

Koninklijke DSM 1.3% LyondellBasell (41.2%) Kemira (21.5%) Westlake Chem. (42.7%) LANXESS (24.5%) Covestro (44.5%) Evonik Industries (24.9%) Dow(4) (49.2%) Clariant (25.6%) Olin (50.4%) Median: Celanese (27.7%) Trinseo (57.9%) (46.9%) Arkema (29.7%) Solvay (33.2%) Huntsman (36.7%) BASF (37.3%) Eastman Chem. (38.8%) Synthomer (39.6%) Median: DuPont(3) (55.5%) (29.7%)

Coatings/Construction Chemicals Ingredients

Sherwin-Williams 6.7% Lonza 23.6% RPM Intern. 3.3% Givaudan 12.6% Sika (1.4%) Siegfried 8.5% PPG Industries (24.7%) Novozymes (0.5%) (1.2%) Akzo Nobel (26.7%) Symrise IFF (14.4%) Axalta Coating (29.8%) Croda Intern. (19.2%) GCP (44.4%) Median: Chr. Hansen (27.0%) H.. Fuller (25.7%) (44.9%) Ashland Global (35.4%) Median: Sensient Techn. (7.8%) Source: S&P Capital IQ as of 03/27/2020 (38.1%) (1) Portfolios indexed at 100 on 03/27/2015; (2) Dark color indicates European and bright color U.S. companies; (3) Performance since Corteva spin off on 03/06/2019; (4) Performance since spin off on 04/02/2019 7 Impact of the COVID-19 Since February 17, 2020

Since mid-February, share prices are down 8%–45%, whereas the commodity and catalyst chemicals stocks as well as the more leveraged companies have been hit the hardest, and the more defensive subsegments like industrial gases or ingredients fared relatively better (commodity minus 38%, catalysts minus 36%, coatings minus 30%, diversified/industrial chemicals minus 34% vs. ingredients minus 19%, and industrial gases minus 25%). The impact of the COVID-19 outbreak has not yet been fully reflected in EBITDA estimate changes, with the strongest revisions to diversified/industrial chemicals and commodity chemicals companies.

Share Price Performance ∆ EV/EBITDA(1) ∆ EBITDA(1) ∆ EV/EBITDA ∆ EBITDA ‘20E(1) ‘20E(1) Median: (33.6%) Median: (18.3%) Median: (6.5%) Eastman Chem. (38%) (18%) (9%) DuPont (36%) (23%) (6%) LANXESS (36%) (13%) (12%) Celanese (35%) (24%) (5%) Clariant (35%) (26%) (1%) Solvay (34%) (16%) (10%) Kemira (34%) (21%) (3%) BASF (34%) (17%) (8%) Huntsman (32%) (12%) (11%) Evonik Industries (32%) (22%) 1% Synthomer (32%) (25%) (14%) Arkema

Diversified/Industrial Chemicals Diversified/Industrial (30%) (16%) (3%) Koninklijke DSM (14%) (9%) (2%)

Median: (37.9%) Median: (11.0%) Median: (13.2%) Dow (41%) (9%) (19%) LyondellBasell (40%) (15%) (16%) Westlake Chem. (40%) (7%) (23%) Olin (36%) (11%) (6%) Trinseo (35%) (11%) (10%) Commodities Covestro (31%) (14%) (10%)

Median: (31.1%) Median: (23.8%) Median: (3.0%)

W. R. Grace (39%) (25%) (3%) Albemarle (39%) (24%) (9%) Johnson Matthey (34%) (25%) (10%) Umicore (31%) (24%) (4%) Linde (25%) (22%) (3%) Air Products (25%) (23%) (3%)

Industrial Gases/Catalysts Industrial L'Air Liquide (24%) (18%) (1%)

Median: (29.7%) Median: (23.3%) Median: (3.6%) H.B. Fuller (45%) (13%) (13%) Axalta Coating (41%) (24%) (8%) Akzo Nobel (33%) (32%) (0%) GCP (30%) (25%) (7%) PPG Industries (29%) (23%) (5%) Chemicals Sherwin-Williams (21%) (24%) (3%) RPM Intern. (21%) (16%) (3%) (15%) Coatings/Construction Coatings/Construction Sika (12%) (1%)

Median: (18.9%) Median: (14.4%) Median: (2.2%) Ashland Global (37%) (25%) (5%) Sensient Techn. (25%) (19%) (3%) Novozymes (20%) (19%) (0%) Symrise (20%) (16%) (1%) Siegfried (19%) (11%) (9%) IFF (19%) (14%) (3%)

Ingredients Croda Intern. (18%) (15%) (9%) Givaudan (15%) (13%) 0% Chr. Hansen (10%) (9%) (0%) Lonza (8%) (7%) 0% (40%) (30%) (20%) (10%) Source: S&P Capital IQ as of 03/27/2020 Note: Share price development since 02/17/2020; dark color indicates European and bright color U.S. companies (1) Delta refers to the consensus change between data as of 03/27/2020 vs. 02/17/2020 8 Public Trading Multiples—Significant Multiple Contraction

Since mid-February, valuation multiples of diversified/industrial and coatings/construction chemicals dropped significantly—back below their 10-year average—whereas commodities, industrial gases/catalysts, and ingredients companies are broadly in line with historical averages.

EV/NTM EBITDA Trading Over Time (Five Years)

Diversified/Industrial Industrial Gases/ Coatings/Construction Segment Commodities Ingredients Chemicals Catalysts Chemicals

10Y-Median 7.9x 6.4x 10.7x 11.1x 13.3x 5Y-Median 8.4x 6.5x 11.8x 11.6x 15.2x 3Y-Median 8.5x 6.7x 11.9x 11.9x 15.9x LTM-Median 8.1x 6.7x 11.9x 12.0x 16.6x NTM-Median 6.8x 7.1x 10.9x 9.2x 15.5x Diversified/Industrial Chemicals Commodities 20.0x Industrial Gases/Catalysts Coatings/Construction Chemicals Ingredients 15.0x

10.0x

5.0x

- Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18 Sep-18 Mar-19 Sep-19 Mar-20

EV/EBITDA 2020E(1)

Diversified/Industrial Chemicals Commodities

Koninklijke DSM 10.7x 11.9x Olin 8.6x 9.6x Clariant 9.9x 13.4x Dow 7.8x 8.6x Median: Huntsman 8.4x 9.6x Westlake Chem. 7.1x 7.7x 6.8x BASF 7.8x 9.4x Covestro 6.5x 7.6x DuPont 7.5x 9.8x LyondellBasell 6.2x 7.2x Median 6.6x Celanese 7.1x 9.3x Trinseo 5.8x (Feb): 7.6x Eastman Chem. 6.7x 8.3x Evonik Industries 6.6x 8.5x LANXESS 6.4x 7.4x Median: Kemira 5.4x 6.8x 6.7x Solvay 5.0x 5.9x Arkema 4.7x 5.6x Median Synthomer 4.6x 6.1x (Feb): 8.5x

Coatings/Construction Chemicals Ingredients

Sika 15.9x 18.2x Chr. Hansen 21.7x 23.8x Sherwin-Williams 14.5x 19.0x Givaudan 21.1x 24.2x RPM Intern. 11.9x 14.1x Lonza 18.6x 20.0x 17.4x 21.5x PPG Industries 9.6x 12.5x Novozymes Median: 16.5x 19.5x GCP 8.6x 11.4x Symrise 9.1x Croda Intern. 14.5x 17.0x H.B. Fuller 8.4x 9.7x Median: IFF 13.9x 16.2x Axalta Coating 8.1x 10.6x 15.5x Median Siegfried 11.6x 13.0x Akzo Nobel 7.9x 11.7x (Feb): 12.1x Sensient Techn. 10.9x 13.4x Median Ashland Global 9.1x 12.3x (Feb): 18.3x Shaded area refers to EV/EBITDA multiple as of 02/17/20 Source: S&P Capital IQ as of 03/27/2020 (1) Dark color indicates European and bright color U.S. companies 9 Broker Estimates—EBITDA

Full impact of COVID-19 is not yet fully reflected by brokers’ EBITDA estimates; most pronounced impact with commodity chemicals companies.

NTM EBITDA Over Time (Five Years)(1)

Diversified/Industrial Chemicals Commodities Industrial Gases/Catalysts Coatings/Construction Chemicals Ingredients

(1%) 100 (4%)

(4%)

(7%)

(13%) 85 17-Feb-20 28-Feb-20 10-Mar-20 21-Mar-20 250

200 +30%

150 +19% +16%

100 +1%

(7%) 50 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18 Sep-18 Mar-19 Sep-19 Mar-20

Change in 2020E/2021E EBITDA Consensus Since February 17, 2020

Diversified/Industrial Chemicals Commodities

2020E 2021E 2020E 2021E

Evonik Industries 0.6% 0.1% Olin (6.1%) (5.9%) Clariant (1.3%) 1.3% Covestro (9.5%) (7.8%) Koninklijke DSM (1.9%) (1.6%) Trinseo (10.4%) (12.2%) Arkema (3.4%) (3.0%) LyondellBasell (16.0%) (15.1%) Kemira (3.4%) (1.9%) Dow (18.6%) (19.6%) Celanese (5.3%) (4.3%) Westlake Chem. (23.3%) (19.3%) DuPont (6.5%) (4.9%) BASF (7.9%) (4.7%) (13.2%) (13.6%) Eastman Chem. (8.6%) (5.4%) Solvay (10.2%) (3.9%) Huntsman (11.0%) (9.8%) LANXESS (12.0%) (6.6%) Synthomer (14.2%) (8.6%) (6.5%) (4.3%)

Coatings/Construction Chemicals Ingredients

Akzo Nobel (0.4%) (2.6%) Givaudan 0.2% (0.1%) Sika (1.1%) (0.5%) Lonza 0.1% (0.7%) Sherwin-Williams (2.6%) (3.1%) Novozymes (0.2%) (1.3%) RPM Intern. (2.6%) (2.4%) Chr. Hansen (0.4%) (0.1%) Symrise (1.5%) (1.8%) PPG Industries (4.7%) (5.3%) IFF (2.8%) (4.0%) GCP (6.7%) (3.5%) Sensient Techn. (3.4%) (1.6%) Axalta Coating (7.6%) (5.4%) Ashland Global (5.0%) (6.3%) H.B. Fuller (13.1%) (7.3%) Croda Intern. (8.7%) (8.6%) (3.6%) (3.3%) Siegfried (8.9%) (7.3%) (2.2%) (1.7%) Source: S&P Capital IQ as of 03/27/2020 Median (1) Portfolios indexed at 100 on 03/27/2015 (2) Dark color indicates European and bright color U.S. companies 10 Broker Estimates—EPS

Full impact of COVID-19 is not yet fully reflected by brokers’ EPS estimates; most pronounced impact with commodity chemicals companies.

NTM EPS Over Time (Five Years)(1)

Diversified/Industrial Chemicals Commodities Industrial Gases/Catalysts Coatings/Construction Chemicals Ingredients 120 (3%) 110 (5%) 100 (6%) 90 (12%) 80 (16%) 300 70 17-Feb-20 28-Feb-20 10-Mar-20 21-Mar-20 250

200 +29%

+29% 150 +23%

100 +9%

(28%) 50 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18 Sep-18 Mar-19 Sep-19 Mar-20

Change in 2020E/2021E EPS Consensus Since February 17, 2020

Diversified/Industrial Chemicals Commodities

2020E 2021E 2020E 2021E

Evonik Industries 0.3% (1.1%) Olin 25.1% (29.6%) Koninklijke DSM (5.2%) (5.9%) Trinseo (13.3%) (22.3%) DuPont (7.2%) (5.5%) LyondellBasell (19.7%) (18.0%) Kemira (7.7%) (5.3%) Dow (29.5%) (28.8%) Clariant (8.3%) (6.4%) Covestro (34.5%) (17.6%) Celanese (8.9%) (5.5%) Westlake Chem.(47.9%) (39.7%) Arkema (9.6%) (6.7%) Huntsman (10.0%) (11.6%) (24.6%) (25.5%) Eastman Chem. (11.6%) (6.9%) LANXESS (12.6%) 0.1% Solvay (13.6%) (8.3%) Synthomer (17.0%) (11.6%) BASF (17.7%) (12.1%) (9.6%) (6.4%)

Coatings/Construction Chemicals Ingredients

Sherwin-Williams (2.9%) (2.8%) Symrise 0.4% (0.3%) Sika (2.9%) (4.0%) Lonza 0.1% (0.6%) RPM Intern. (3.1%) (2.8%) Novozymes (0.4%) 0.3% (0.6%) PPG Industries (3.3%) (4.2%) Chr. Hansen (0.9%) Givaudan (2.1%) (0.7%) Akzo Nobel (6.6%) (4.5%) Sensient Techn. (2.3%) (3.6%) GCP (9.2%) (9.5%) IFF (3.3%) (7.4%) Axalta Coating (9.8%) (3.4%) Ashland Global (5.8%) (5.6%) H.B. Fuller (25.2%) (10.8%) Croda Intern. (12.2%) (9.7%) (4.9%) (4.1%) Siegfried (15.7%) (12.3%) (2.2%) (2.1%) Source: S&P Capital IQ as of 03/27/2020 Median (1) Portfolios indexed at 100 on 03/27/2015 (2) Dark color indicates European and bright color U.S. companies 11 Chemical M&A Activity

While the chemicals M&A market has been very active on both the private equity and corporate sides in the last years, the last 12 months in particular have seen several corporate carve out/divestitures and financial sponsors selling relatively “young” portfolio assets. Valuation levels had come down somewhat; however, they remained at elevated levels. In recent weeks, most of the M&A processes have been put on hold, and new launches have been postponed until there is more visibility on financial impact of the crisis as well as overall business performance and valuation levels. advised on the sale of CIMCOOL to DuBois Chemicals, which was one of the last announced (March 20) and closed (March 30) chemicals transactions to date.

Strategic Buyer Median Strategic Buyer 12.4x

Financial Buyer Median Financial Buyer 9.2x

Date EV $ Buyer Target EV/EBITDA

19-Jan 2,550 Sika Parex (CVC Fund V) 13.1x

19-Jan 900 Symrise IDF, ADF 17.6x

19-Feb 150 Royal DSM Yantai Andre Pectin Co. Ltd. (46% stake) 13.0x

19-Feb 338 New Mountain Capital Aceto (Performance Chemicals) 9.7x

19-Mar 3,000 Advent Evonik MMA 8.5x

19-Mar 5,800 Merck Versum 13.7x

19-Apr 2,980 Nippon DuluxGroup 16.1x

19-Apr 3,292 Parker Hannifin Lord Corp. 18.4x

19-May 570 Arkema ArrMaz 10.8x

19-Jul 661 Synthomer Omnova Solutions 9.9x Chevron Phillips 19-Jul 15,000 Nova Chemicals Chemical 12.2x

19-Aug 2,076 Indorama Chemical Intermediates (Huntsman) 8.0x 2019

19-Aug 2,400 Cambrex 16.2x

19-Aug 775 SK Capital Partners PolyOne (Performance Products and Solutions) 8.7x

19-Aug 1,300 DIC Corp. BASF ( business) 9.6x One Rock Capital 19-Oct 832 Innophos 8.4x Partners 19-Oct 530 Daelim Industrial Kraton‘s Cariflex business 10.5x

19-Dec 350 Huntsman Icynene-Lapolla 10.0x

19-Dec 26,200 IFF DuPont (Nutrition and Biosciences) 17.8x Clariant (Color and Additive Masterbatch 19-Dec 1,447 PolyOne 11.1x Business) 19-Dec 3,500 Lone Star Funds BASF Construction Chemicals 10.5x

19-Dec 9,027 Showa Denko Chemical 13.4x

19-Dec 3,900 Apergy Corp Nalco Champion 12.5x

20-Mar 300 Huntsman CVC Thermoset Specialties 10.0x 2020

Source: Company information, MergerMarket 12 Case Study: CIMCOOL

Cimcool is a leading global formulator and manufacturer of high-performance specialty metalworking fluids, including removal, , protective, and cleaning fluids

Business and Transaction Highlights

 On March 20, 2020, Hillenbrand, Inc. (NYSE:HI; “Hillenbrand” or the “company”) announced the signing of an agreement to sell Cimcool to DuBois Chemicals, Inc. (DuBois), a portfolio company of Altas Partners. The transaction closed on March 30  DuBois acquired Cimcool at a purchase price of approximately $224 million in cash. In addition, DuBois has agreed to pay up to $26 million in contingent purchase price, upon the future sale of the combined DuBois and Cimcool businesses  Cimcool is a leading global manufacturer of high-performance specialty metalworking fluids, including removal, forming, protective, and cleaning fluids  Serves a global and wide range of customers across diverse end markets  Four facilities in the U.S., the , China, and South Korea  Transaction expands DuBois’ facility footprint into Europe and Asia

Keys to Process and Valuation Success

 Conducted a highly competitive and global process with a focus on U.S. and European strategics and sponsors  Customized and tight process timeline to drive competitive tension throughout the process  Significant upfront preparation of diligence deliverables, including a QoE report and a robust data room allowed for immediate due diligence on an accelerated timeline  Maintained significant deal momentum to drive both valuation and speed to signing, even after the outbreak of COVID-19  Limited incremental stand-alone costs simplified carve-out complexities

Nov 2019 Feb 2020 Mar 2020 Closing of Milacron/ IOI submission Signed definitive Hillenbrand transaction; deadline agreement announcement of review of strategic options for Cimcool

Nov 2019 Dec 2019 Jan 2020 Feb 2020 Mar 2020

Dec 2019 Jan 2020 Mar 2020 Mar 2020 Closing Thorough Market Rapid COVID- process outreach 19 outbreak in preparation Western Hemisphere

13 Questions and Considerations

Volatile market conditions have created many questions for businesses. Our significant product and sector expertise positions us to help review a variety of strategic alternatives.

Debt Market Update

Are private credit Private market issuances are open, but on a case-by-case basis. Lenders are willing to markets open for new provide financing, but are starting to seek higher yields and more structure on terms investments? (i.e., covenants and definitions).

Amid uncertainty, there has been a recent trend among borrowers to draw down on What are the effects of revolving credit facilities to provide additional liquidity. Lenders that hold revolving credit market volatility on commitments have typically reserved capital to satisfy their obligations in respect to existing ? undrawn lines of credit, which is now further supported by an emergency $1.5 trillion repurchase offering implemented by the New York Fed on March 12.

What should I do if my covenants are There are a number of alternative capital providers willing to engage in refinancing tightening or my discussions. Please reach out to us directly to discuss your particular situation. lenders are being difficult?

Sellers

Sellers are expected to hit “pause” on new deal launches as companies reprioritize and Are sellers launching focus on addressing near-term business needs. That said, a number of existing processes are moving forward, but parties are proceeding slowly and cautiously in light new processes? of the limited financing availabilities with the hope of improved market stability by the time they are ready to sign.

Are valuations going to Market volatility will continue to drive depressed valuations as buyers are discouraged by performance, business uncertainty, and deal risks. -resistant businesses fundamentally change? and industries may be valued at a premium to market.

Private Equity Market

How are financial Sponsors have shifted focus to addressing near-term business and liquidity needs for sponsors thinking existing portfolio companies to “weather the storm.” about portfolios?

Many sponsors continue to evaluate new opportunities with a potential setup for a Are financial sponsors “buyer’s market.” Where target fundamentals remain intact, previously unavailable looking at new deals? deals may become actionable at bargain prices if valuations experience a “reversion to mean” and strategics and more conservative bidders remain on the sidelines.

Source: S&P LCD, LFI Weekly 14 How Houlihan Lokey Can Help

Our firm is extremely well equipped to help our clients navigate uncertain times. We respond quickly to challenging situations and are constantly helping clients analyze, structure, negotiate, and execute the best possible solutions from both strategic and financial perspectives.

What We Offer Corporate We are widely recognized as a leading M&A advisor to the 1 middle market and have long-standing relationships with capital providers, including commercial and other senior credit providers, funds, asset managers, and mezzanine fund investors. Few other investment banks Capital Markets maintain the breadth of relationships and capital markets intelligence that we do. Private Funds Advisory

Financial Board Advisory Services We have the largest restructuring practice of any global investment . Since 1988, we have advised on more than 2 Financial Restructuring 1,000 restructuring transactions (with aggregate debt claims in excess of $2.5 trillion). We served as an advisor in 12 of Company Advisory the largest 15 bankruptcies from 2000 to 2019.

Financial Restructuring Financial and Valuation Advisory Distressed M&A For nearly four decades, we have established ourselves as one of the largest financial and valuation advisory firms. Our transaction expertise and leadership in the field of valuation Liability helps inspire confidence in financial executives, boards of directors, special committees, investors, and business Creditor Advisory owners we serve.

3 Financial and Valuation Advisory Why We’re Different Portfolio Valuation and Fund Advisory ✓ Dominant in Special Situations and Restructuring Transaction Opinions ✓ Significant Experience With Financing Markets Corporate Valuation Advisory Services ✓ Senior-Level Commitment and Dedication

Transaction Advisory Services ✓ Deep, Industry-Specific Expertise

Real Estate Valuation and Advisory ✓ Superior Product/Technical Abilities

Dispute Resolution Consulting ✓ Creativity, Imagination, Tenacity, and Positivity

15 Leveraged Finance Market Impact From COVID-19 European Leveraged Loans and U.S. Leveraged Loans and High- High-Yield: Average Bid and Yield(1) Yield: Average Bid and Yield

110 12.0% 110 10.0% 10.0% 8.0% 100 100 8.0% 6.0% 90 6.0% 90 4.0% 4.0% 80 80 2.0% 2.0% 70 70 Jan-20 Feb-20 Mar-20 Jan-20 Feb-20 Mar-20

Average European Leveraged Flow-Name Bid Average U.S. Leveraged Loan Flow-Name Bid Average U.S. High Yield Flow-Name Bid Average European High-Yield Bond Flow-Name Bid - Average U.S. High-Yield Bond Yield Average European High-Yield Bond Yield Average U.S. Leveraged Loan New-Issue Yield Leveraged Loans and High-Yield Issuance Volume

European Market (€B) U.S. Market ($B)

20.0 90.0 18.0 80.0 16.0 70.0 14.0 60.0 12.0 50.0 10.0 40.0 8.0 6.0 30.0 4.0 20.0 2.0 10.0 0.0 0.0

Leverage Loan Issuance Volume Leverage Loan Issuance Volume High-Yield Bond Issuance Volume High-Yield Bond Issuance Volume

Primary Deals Getting Pulled Because of Adverse Market Conditions Volatility Index (U.S. and Europe)

Tranche Proposed 100 Date Issuer UoP Sponsor Sector CFR Size Pricing L+375-400/ 80 Micro B1/ $500M 99.0 65.5 Mar-20 Refinancing - Services Focus BB- €500M E+325-350/ 60 99.5 61.0 E+225/ Messer BB-/ €540M 40 Feb-20 Repricing CVC Industrials 99.875-100 Industries B1 $2,200M L+225/ 99.875 20 Alix CPPIB & B+/ E+275-300/ Feb-20 Repricing Consulting €348M Partners CDPQ B2 Par 0 Fire Safety B+/ €506M E+250/Par Jan-20 Feb-20 Mar-20 27-Mar-20 Feb-20 Minimax Repricing KIRKBI Equipment B1 $590M L+225/Par U.S. (CBOE Volatility S&P 500 Index) EU ( STOXX 50 Volatility Index) Note: Market data retrieved as of 03/27/2020 Source: Bloomberg, S&P Capital IQ, LCD (1) Yield data for European leveraged loans not available on a weekly basis 16 Disclaimer

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