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Global perspective Dede Williams
Eye for a bargain Successful European corporate turnarounds are rumoured to have captured the interest of Middle Eastern predators
R
eports that Sabic or other Middle East players, flush with cash from the oil and petrochemicals price boom, could be on the prowl
for fresh European blood have sparked rumours that at least three, if not four, medium-sized players could be in the crosshairs.
Company names popping up in the ensuing flurry of speculation included France’s Arkema, Germany’s Lanxess and DSM of the Netherlands. The name Huntsman was already in the ring. The first two companies are of similar size, with sales in the €6-7bn range and Ebitda of about €1bn. DSM, with sales of €9bn and Ebitda of €1.3bn, is also a medium-sized company by chemical industry standards. Ironically, it was much bigger before selling its petrochemical assets a decade ago – to Sabic. Unsurprisingly, executives of the
purportedly targeted companies were disinclined to comment publicly. However, concerns expressed by the French political sector that the country’s industry is in danger because it does not have a top player in the global rankings added fuel to the fire and trained the spotlight on Arkema.
Both Lanxess and Arkema have
been prominent in the news recently as successful restructuring and portfolio optimisation efforts have caught the attention of financial markets. Listed in the M-DAX of medium-sized companies since its detachment from Bayer in 2005, Lanxess was ‘promoted’ to the German DAX index of top 30 blue- chip companies on 24 September 2012. A similar move up into France’s elite CAC 40 index is rumoured to be on the cards for Arkema.
Once lampooned as ‘Bayer’s bargain
analyst recently commented that Lanxess is ‘a delicacy’ on the investor’s plate. The German company’s ‘prudent and
strategic approach to growth’ are the reasons for the successful turnaround, Heitmann proclaimed to investors and journalists in New York in September 2012. A day later in Paris, Arkema ceo Thierry Le Hénaff presented the company’s ‘roadmap’ for lifting the Ebitda margin to 17% up to 2016, while indirectly patting himself and his team on the back for a job well done. Since its spin-off from French
basement’ because of the many low- margin chemicals and plastics businesses it inherited – in 2005, Ebitda was only €58m – few thought Lanxess would retain its independence very long before being gobbled up for peanuts and cannibalised by a larger player. Meanwhile, annual earnings have risen to over €1bn.
Despite the weakening outlook for the chemicals sector generally, ceo Axel Heitmann has upheld earlier forecasts that Ebitda could be 5-10% higher in 2012 than in 2011. For 2014, he has raised the bar to €1.4bn and for 2018 to €1.8bn. The share price has risen by 195% over the past three years, and an
‘Rather than buy an ailing company and nurse it back to health, why not make a grab for one that is already healthy, even if it costs a little more?’
Axel Heitmann, chairman of Lanxess
petrochemical giant Total in 2006, Arkema has achieved more than €500m in fixed-cost savings, Le Hénaff asserted, noting that under-performing bulk businesses with sales of €1.6bn have been divested and more profitable assets of the same sales value added. The French executive also boasted that the company’s share price has gained 164% since 2006.
Although always after a bargain,
large companies with fat wallets have meanwhile come to realise that success stories like these are the stuff takeover dreams are made of. Rather than buy an ailing company and nurse it back to health, why not make a grab for one that is already healthy, even if it costs a little more?
While most of Lanxess’ shares
are owned by institutional investors, observers say its French rival’s capital is in the hands of a large number of shareholders and market capitalisation is low, making it a potentially more attractive target.
Dede Williams is a freelance journalist based in Frankfurt, Germany who specialises in the chemicals sector
Chemistry&Industry • November 2012 37
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