DSM Said to Seek Final Bids for Entire Caprolactam Unit

Royal DSM NV (DSM) is in advanced talks to sell its business making caprolactam, used in plastics and car parts, and may announce a deal before year-end, according to two people with knowledge of the matter.

The bidding process is in the second round, with buyout firms and corporate rivals preparing detailed offers, said the people, who asked not to be identified because the talks are private. The asset may fetch more than 200 million euros ($270 million), the people said.

Chief Executive Officer Feike Sijbesma is trying to focus the Dutch chemical company, which has produced caprolactam for more than 60 years, on more profitable food ingredients and high-performance materials. While caprolactam is an important feedstock for DSM’s polyamide resins and materials, competition from low-cost Chinese manufacturers has increased supplies and damped prices. Valence Group is advising on the potential sale, according to the people.

DSM, which has said it’s reviewing options for just the merchant side of the caprolactam business, declined to comment on whether the whole unit is up for sale.

DSM, which has spent $3.2 billion on nutrition-ingredient acquisitions, said earlier today that profit this year may fall short of an initial target, weighed down by stagnant markets in Europe, lower pricing for chemicals, exchange-rate moves and Dutch tax legislation.

Cut Target

Earnings before interest, taxes, depreciation and amortization may be ’’slightly below’’ 1.35 billion euros, the Heerlen, Netherlands-based company said. After originally setting a target of 1.4 billion euros, DSM reiterated today it would be ’’moving towards’’ that level of profit.

DSM shares dropped as much as 6.9 percent to 54.28 euros and were down 5.9 percent as of 11:18 a.m. in Amsterdam, valuing the company at 10 billion euros.

Caprolactam accounted for the bulk of DSM’s 1.6 billion euros in sales last year at its polymer intermediates business, which employs about 1,500 workers. Revenue declined 16 percent last year on lower volumes and prices, with profit at the division slumping about 68 percent as it struggled to pass on higher benzene prices to customers.

Caprolactam, also produced by Germany’s BASF SE (BAS), is used in a broad range of products from plastics and films to carpets and tire cords. DSM is currently putting the final touches on a $300 million plant in a partnership with China Petroleum & Chemical Corp. (386), known as Sinopec. The factory will be the world’s largest.

To contact the reporters on this story: Andrew Noel in London at anoel@bloomberg.net; Sheenagh Matthews in Frankfurt at smatthews6@bloomberg.net

To contact the editor responsible for this story: Simon Thiel at sthiel1@bloomberg.net

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