Kemira Oyj, which makes chemicals for the paper, oil and mining industries, is in talks to sell a formic acid unit to Addcon Group of Germany or private-equity firms, according to four people with knowledge of the matter.
The Finnish company aims to get about 200 million euros ($265 million) from selling ChemSolutions, though Addcon and other suitors have submitted lower proposals, said the people, who declined to be identified because the talks are private. The interested parties submitted offers in late August, said the people. The stock rose the most in more than two months.
Kemira Chief Executive Officer Wolfgang Buechele is selling the unit as he’s revamping the Helsinki-based company to focus on offerings for drilling wells, mining and paper production. A deal would give Bonn, Germany-based Addcon, a customer of ChemSolutions, cheaper access to one of its major raw materials that’s processed into ingredients for animal feed, food and runway de-icers.
Kemira’s target is to fetch eight times earnings before interest, taxes, depreciation and amortization for the asset, a valuation hinged on the growing use of formic acid in food and animal feed, where it’s an alternative to antibiotics, the people said. Management presentations are still being held to reach out to additional potential suitors, one of the people said. Addcon and Kemira declined to comment.
Kemira’s shares jumped as much as 3.5 percent to 12.95 euros, the biggest intraday gain since June 27, and were up 3 percent as of 1:30 p.m. in Helsinki, valuing the company at 2 billion euros. The stock has gained 9 percent this year while the OMX Helsinki 25 Index rose 18 percent.
Production at ChemSolutions is running at 100 percent capacity, driven by high demand, helping the unit keep operating profit margins at about 20 percent, two of the people said.
Formic acid occurs naturally in ant venom. Though a diluted form is used as a preservative in food, farming and leather production, the colorless liquid is hazardous to transport when highly concentrated. BASF SE is the other major European supplier of formic acid. Perstorp, the Swedish chemical maker owned by PAI Partners, also has a small formic acid operation.