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Clariant Leather Unit Said to Draw Black Diamond, SK

Clariant AG (CLN)’s leather-chemicals business has attracted offers from private-equity companies including Black Diamond Capital Management LLC and SK Capital Partners LP, according to four people familiar with the matter.

Negotiations are ongoing and an agreement may be reached this year, said the people, who asked not to be identified as the sale process is private. Stahl, a rival of Switzerland’s Clariant in the leather-chemical market owned by French buyout firm Wendel SA (MF), expressed an interest in a merger to lower costs and broaden its offering, one of the people said.

The leather-services business of Clariant, which has 12 production sites and employs about 700 people, may fetch 164 million francs ($181 million), according to the average of five analyst estimates compiled by Bloomberg. Representatives for Clariant, Black Diamond, SK Capital and Wendel declined to comment on a potential deal.

Black Diamond’s takeover of Germany’s TFL Holding GmbH last month marked the potential start of consolidation in the $4 billion leather-chemical industry, after more than five years of failed attempts by the five dominant companies including BASF SE (BAS) and Lanxess AG (LXS) to merge assets. Profits of leather-chemical companies suffered amid the European debt crisis and as Asian rivals added capacity, driven by local demand for luxury bags, shoes and upholstery.

Clariant rose 1.2 percent to 15.24 francs in Zurich trading today, valuing the company at 5.1 billion francs. The stock has gained 23 percent this year.

Clariant’s Transformation

Clariant this month agreed to sell a unit making detergent and intermediate chemicals to private industrial holding company International Chemical Investors Group for 58 million francs, bringing Chief Executive Officer Hariolf Kottmann closer to his goal of focusing on higher-growth markets.

Kottmann is transforming Clariant after the $2.5 billion purchase of Sued Chemie in 2011. He lowered the price for three units sold to SK Capital Partners to $470 million to get the deal done as results at the businesses making chemicals for the paper, textile and emulsions markets weakened.

Consolidation in the European leather-chemical industry would be aided by signs of economic resurgence in the euro-area economy. Economic confidence in the area increased more than economists forecast in September, the European Commission in Brussels said Sept. 27. That may spur demand for luxury cars, shoes and handbags.

Ore Operations

Clariant, based in Muttenz, tried to sell its leather unit in 2008, and Lanxess and BASF previously discussed combining their assets. BASF in 2011 said it failed to find a buyer for its leather-chemicals assets as offers fell short of its own valuation. The company at the time said it would retain the business after management improved its performance.

Lanxess, which has been in the leather-chemicals industry for almost 100 years, purchased Dow Chemical Co.’s chromium ore operations in South Africa in 2006, and it remains the only supplier with the entire value chain from chrome ore to the leather tanning materials. Stahl, owned by Paris-based buyout firm Wendel, said in August that it continues to “seek out consolidation opportunities.”

TFL, a maker of tanning agents and dyestuffs for leather bags and shoes, fell into the hands of creditors before being sold in a prolonged process. A decade of ownership by buyout firm Odewald & Cie. left it with inflated debt at a time when demand was suffering during the economic slowdown in Europe.

To contact the reporters on this story: Andrew Noel in London at anoel@bloomberg.net; Patrick Winters in Zurich at pwinters3@bloomberg.net

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

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