Bayer and ICI sell-offs to boost balance sheets
Europe's chemicals industry is set for a fresh round of consolidation with two top names on the threshold of disposals to boost balance sheets.
YesterdayBayer, based at Leverkusen in Germany, set a June 1 date for floating its imaging subsidiary Agfa-Gevaert, which could raise up to £2 billion.
ICI is widely tipped to disclose a £1.7 billion package of disposals to the US Huntsman group in a move to reduce its debt burden. Huntsman, based in Salt Lake City, is expected to take over ICI's petroleum business at Teesside and Tioxide, its titanium dioxide subsidiary.
ICI has been trying to sell its traditional commodity chemicals business to concentrate on more profitable specialty chemicals. A proposed sale of Tioxide to Du Pont and NL Industries of the US fell through last year because of objections from the federal trade commission. The planned sale of ICI's Crosfield division to US chemicals producer, WR Grace, was turned down in October.
Huntsman's purchase would strengthen the US company's grip on producing low-margin chemicals used in plastic film, packaging, foam and construction materials. Huntsman, run by philanthropist Jon Huntsman, has an annual revenue of $5 billion thanks to aggressive buying that includes more than 30 deals during the past 15 years.
'Huntsman is a lean operation that has a history of buying industries at a discount at the bottom of the cycle and then running them at low cost,' said Adrian Slywotzky, a vice president with Mercer Management Consulting.
Mr Huntsman, a Mormon, built up his family empire from scratch after putting his home up as collateral to help finance the acquisition of a Shell Oil polystyrene business in 1983.
Expectations of further European mergers received a setback when talks between Laporte and the Swiss-German company Clariant were called off earlier this week. Analysts believe that a combination of relatively low share prices, improving demand and the willingness of companies to contemplate mergers will lead to further alliances.
There is speculation about how Bayer will use the money from Agfa. Yesterday it said it could sell up to 55 per cent of Agfa via a general offer with another 15 per cent to Belgium's Gevaert. Gevaert will also have the option to buy another 10 per cent in a year. Yesterday's announcement gave no clue as to price but analysts reckon if the public offer is fully subscribed and if Gevaert exercises its option it could bring in £2 billion.