Specialty Chemicals

Evonik Courts Clariant

Will Evonik's Klaus Engel make a meal out of Clariant? Source: DPA
Will Evonik's Klaus Engel make a meal out of Clariant?
  • Why it matters

    Why it matters

    The tie-up could help make Essen-based Evonik a market leader as the European chemicals sector consolidates.

  • Facts

    Facts

    • Evonik is reportedly mulling a €7.3-billion bid for Clariant.
    • So far, Evonik has failed to get the Swiss to discuss a takeover.
    • Evonik boss Klaus Engel has expressed his intention to make a big acquisition.
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    Audio

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Klaus Engel is a man who knows what he wants and doesn’t mince words. Evonik’s chairman has made no secret of the fact that he’d like to make some strategic acquisitions to beef up the German specialty chemicals company.

“We are well prepared – also for larger transactions,” he recently told analysts.

Prior to that, he emphasized that Evonik didn’t plan “to stay on the sidelines” while its sector consolidated.

Mr. Engel has so far kept his powder dry, but he now appears to have found a target: Evonik’s Swiss rival Clariant. According to the Financial Times, the Essen-based firm was considering making a €7.3 billion, or $7.99 billion takeover bid.

Sources at Evonik confirmed to Handelsblatt that the Swiss firm was on a list of acceptable takeover targets, but no decision to make a bid had been made yet. Both Evonik and Clariant declined to comment officially.

But Mr. Engel is now under pressure to follow up his words with deeds and make a big deal happen. Evonik sources said he has pursued other acquisitions in the past, including the Dutch materials and life science group DSM.

Evonik had also discussed buying Bayer’s plastics division, but failed to agree to a price. Bayer MaterialScience is now being spun off and listed on the stock market.

Evonik’s advances also ran into trouble due to the egos of the managers involved – which could also present a problem with Clariant. Its boss, Hariolf Kottmann, told the Swiss newspaper Handelszeitung that he would be “surprised and bitterly disappointed” if a competitor launched a takeover bid. “The sector knows that we don’t want to be taken over,” he made clear.

Clariant is widely considered a prime takeover target in the European chemicals industry.

Analysts, however, consider a merger between Clariant and Evonik plausible. The Swiss firm would fit well with German company’s portfolio, said Markus Mayer from Baader Bank. Clariant is strong in process catalysts, an area Evonik is trying to strengthen.

Just this month, it announced the purchase of the Indian firm Monarch Catalyst. Clariant makes roughly a quarter of its turnover of €5.71 billion from maintenance and care chemicals, which offer attractive margins.

Clariant has a strong presence in Germany after buying Hoechst’s chemicals business in 1997 and taking over Süd-Chemie in 2011. Since then, Clariant has focused on expanding its high-margin specialty chemicals division.

“Clariant has streamlined its portfolio over years and there’s little room for further improvement,” said Patrick Rafaisz from the Swiss private bank Vontobel. Its Ebitda margins at 14 percent are below its own targets of 16 to 19 percent, but that’s still “a solid figure,” he said.

Evonik would have no problem paying price tag of €7.3 billion. The company has no debt and net financial assets totaling €400 million. It was recently generating a cash flow of more than €1 billion from its operating business. Sales last year came close to €13 billion and its adjusted Ebitda profit margin was 14.5 percent.

Clariant is widely considered a prime takeover target in the European chemicals industry. If the Swiss company shows any willingness to be courted by Evonik, sector rivals are sure to crop up. The Baader Bank analyst Mr. Mayer considers counter bids likely.

 

Holger Alich, Bert Fröndhoff and Maike Telgheder are correspondents in Zurich, Düsseldorf and Frankfurt for Handelsblatt. To contact them: alich@handelsblatt.com, froendhoff@handelsblatt.com and telgheder@handelsblatt.com

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