Lanxess Said to Hire Macquarie to Explore Rubber Options
Lanxess AG (LXS) has hired Macquarie Bank Ltd. to advise on the potential sale of a rubber-chemicals business, according to people with knowledge of the matter.
The process to explore options for the asset is still in the early stages, said the people, who asked not to be named because details of the review are private. The operations, consisting of rubber antioxidant and vulcanization accelerator assets, generate an estimated $150 million to $200 million in sales, according to one of the people.
Cologne, Germany-based Lanxess in September said it will consider the future of the business and other units with 500 million euros ($693 million) in combined sales. The announcement already prompted enquiries from potential buyers, the people said. Representatives for Lanxess and Macquarie declined to comment.
Merck KGaA Chief Financial Officer Matthias Zachert will take over as Lanxess chief executive officer on April 1 and the management change may herald changes to the company’s strategy and portfolio. The executive needs to revive earnings and sales at the company, which generates about 40 percent of revenue from the auto and tire industries. European car sales have declined for six consecutive years, yet are starting to recover this year.
Shares of Lanxess surged 2.3 percent in intraday trading and were up 1.1 percent as of 1:13 p.m. in Frankfurt, valuing the company at 4.3 billion euros. Before today, the stock had risen 4.7 percent this year.
Zachert would be “well served” by pursuing a joint venture for most of the company’s synthetic rubber business, valued at 3.3 billion euros, given overcapacity in the market, according to Jaideep Pandya, an analyst at Berenberg.
A disposal of 51 percent of the synthetic-rubber unit, excluding top-end technology based on emulsion styrene-butadiene rubber and solution styrene-butadiene rubber, may generate cash of 1.68 billion euros that could be used for expanding Lanxess’s agrochemical and water-treatment business, Pandya said.
PricewaterhouseCoopers LLP is assisting with the carve out of the operations that will be bundled together for the strategic review, the people said. The package consists of four plants: Kallo in Belgium, Bushy Park in South Carolina, Jhagadia in India, and Brunsbuettel in Germany. A PwC representative declined to comment.
The unit may attract interest from buyers in China and elsewhere in Asia, as well as private equity firms. Carlyle Group in 2008 invested $87 million in a partnership with China’s Sinorgchem, which makes chemical additives for rubber. The investment is being used to spur Sinorgchem’s expansion overseas. Sinochem acquired Carlyle’s stake in Sinorgchem in 2012. Eastman Chemical Co. is also a competitor in the market.
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