Lanxess AG climbed the most in six months in Frankfurt trading with speculation about a Dow Chemical Co. bid highlighting an enduring belief among some investors that the synthetic-rubber maker is a takeover target.
Lanxess, the newest member of Germany’s benchmark DAX index, rose as much as 5.3 percent to 64.60 euros, its biggest jump since Aug. 3. Market talk that Dow is willing to pay 70 euros to 80 euros per share for Lanxess don’t make sense because Dow has an extensive capital expenditure program already and there is very little overlap in the companies’ businesses, said Jaideep Pandya, an analyst at Berenberg Bank.
“Nevertheless, Lanxess is always an attractive takeover target because they have such great technology,” Pandya, who has a buy rating on the stock, said by telephone. “They will remain an attractive asset for big petrochemical companies from Asia and the Middle East.”
Dow, the largest U.S. chemical maker, last month reported quarterly profit that missed analyst estimates as sales fell in Europe. While the company is awaiting payment of $2.5 billion in settlement for the canceled sale of a plastics business stake, that cash won’t be allocated to mergers and acquisitions, Chief Executive Officer Andrew Liveris said then. Lanxess was trading up 4.1 percent at 63.86 euros as of 11:58 a.m. local time. The stock has lost 3.6 percent this year, cutting the company’s market value to 5.3 billion euros ($7.2 billion).
Lanxess spokesman Daniel Smith and Dow Chemical spokeswoman Rebecca Bentley both declined to comment on takeover speculation.
Saudi Basic Industries Corp., also known as Sabic, LG Chem Ltd. and Reliance Industries Ltd. may consider buying Lanxess, Jaideep said. “They all want to enter the Lanxess playing field in terms of high-end synthetic rubber and they all don’t have technology.”
Dow had $4.32 billion in cash at the end of last year while Sabic had $13.7 billion, according to data compiled by Bloomberg.
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