Evonik Says Farewell to the ‘Friendly Locust’ as CVC Sells Stake

  • German firm drops as CVC disposes of shares at discount price
  • CVC selling 19.8 million shares at 25.50 euros apiece

CVC Capital Partners Ltd. is selling its remaining stake in Evonik Industries AG after eight years of helping to transform the German chemical company into a more profitable business focused on animal-nutrition ingredients and coatings additives.

The private equity firm sold 19.8 million shares via a bookbuilding process run by JP Morgan, priced at a discount 25.50 euros apiece, according to a statement on Tuesday. Evonik shares fell as much as 6.6 percent and traded 5 percent lower at 25.64 euros as of 1:27 p.m. in Frankfurt, on track for the lowest level since April 5.

As an investor in Evonik, CVC sat alongside that of the chemical maker’s other main shareholder, RAG Stiftung, a German state-backed foundation that gives decision making at the company a political edge. The ups and downs of CVC’s investment in Evonik included several unsuccessful attempts at an initial public offering before listing shares in 2013 and last month’s announcement of the acquisition of a chemicals division from Air Products & Chemicals Inc. for $3.8 billion.

“If you look at what the company did, you can see that both CVC and RAG were aligned,” said Andreas Heine, an analyst at Main First Bank AG, which advised the top two shareholders in Evonik on a share placement in 2013.

CVC’s 2008 investment in Evonik came amid a backdrop of public criticism toward the private equity industry in Germany. Legislator Franz Munterfering’s 2004 reference to buyout firms as locusts prompted a bold retort from Evonik when it penned the agreement with CVC four years later. The company took out a full-page newspaper advertisement announcing the deal illustrated by a smiling locust, underlined with the words: ‘We are relishing the prospect of a successful future with our new partner CVC’.

Among the disposals overseen by CVC was the sale of a division supplying carbon black to tiremakers to Rhone Capital and Triton Partners for 900 million euros in 2011.

RAG Remains

Part of the shares sold were from a convertible bond that CVC repurchased. It already relinquished its two board seats at the Essen, Germany-based company at the annual general meeting on May 18.

RAG remains the controlling shareholder, and there’s been no indication that the foundation wants to follow CVC and completely exit the business. Faced with estimated expenses of 200 million euros ($233 million) a year in costs to maintain former coal mines in Germany, Evonik needs a steady income.

“Evonik has a 4 percent dividend yield, and it’s not so easy to find a better investment in these times of low interest rates,” Heine said.

Before it's here, it's on the Bloomberg Terminal.