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Great Titchfield Street, London -- UK investors looking to invest in chemical stocks are finding their options dwindling by the day. Elementis (LSE: ELM) recently announced it had been approached and this morning Laporte (LSE: LPRT) received a £1.36m joint offer from two German chemical groups, Degussa and SKW. These two companies are both two-thirds owned by the German industrial group E.ON. If these offers go ahead the UK will be left with just three chemical groups valued at over £2b, namely BOC (LSE: BOC), ICI (LSE: ICI) and Johnson Matthey (LSE: JMAT), but no other representatives valued at greater than £400m. No surprises Neither of these recent takeover approachs come as that much of a surprise. Elementis emerged from the mini-conglomerate Harrison & Crosfield and has long been seen as vulnerable to a bid. Laporte has been hanging on the corporate street corner for a number of years and recently tarted itself up even further by selling half of its business to the giant US venture capitalist KKR. The offer for Laporte is for 697p in cash for each share, so recent investors who bought in at around 400p in September will be very happy. But long-term holders will be less impressed with their returns. The share price of Laporte is at the same level it was eight years ago, as this chart shows. In the meantime investors with a plain old index tracker have seen handsome returns. Chemical companies are supposed to be cyclical investments and it's worth bearing in mind that it many cases this means an average long-term return that is barely worth mentioning. If you are prepared to invest time in researching a cyclical industry then you can make reasonable returns by "timing" the cycles. But this is not a form of investment that suits many people. More to come? Should you scour the back of the chemical cupboard for other companies that may be taken over? Two of the cheapest are British Vita (LSE: BVIT) and Yule Catto (LSE: YULC) which are valued at seven times forecast earnings for 2001. But a quick glance at their long-term charts shows that their share price performance has also lacked inspiration for the last seven or eight years. The prices of chemical companies have already risen this morning, reducing any potential gains you may have made. It's also worth bearing in mind that the most attractive fruits are often picked first. You may get lucky but usually the odds are against you. The chemicals sector is one place I won't be looking when I search for my next investment. Where Next?
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