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Evonik's methacrylates disposal worth €1.8bn, positive long-term move – analyst

March 6, 2018
Chemical Value Chain

Evonik’s board is exploring the possibility of divesting its methacrylates businesses, in a deal potentially worth €1.8bn, as it looks to sharpen the focus on specialty chemicals in order to implement its strategy, the German specialty chemicals company said on Tuesday.

Evonik, which released its fourth-quarter and full-year results earlier on Tuesday, said that it was examining potential partnerships “or a complete exit” for its methacrylates businesses.

The company’s methacrylates business posted approximately €1.5bn in sales in 2017 and has 3,700 employees over 18 sites.

“Our MMA [methyl methacrylate] and PMMA [polymethyl methacrylate] businesses have leading competitive positions and they are profitable and attractive,” said the company’s CEO Christian Kullmann.

“We can therefore explore the options without time pressure and decide on the best solution.”

During the company’s annual results press conference in Essen, Kullmann was asked if interest from potential buyers had accelerated Evonik’s decision to explore options surrounding methacrylates.

However, he declined to comment on any potential suitors, and preferred to focus on Evonik and its strategy.

“We, as board members, are supposed to manage the company in a way that it grows and makes shareholders as happy as employees. We have to align our strategy with this ambition,” he said.

“Our strategy has to be defined by ourselves; we cannot be dependent on anyone else. We are not driven by what other people consider to be good or less good, we are guided by what is best for our company.”

Analysts at Bernstein Research said on Tuesday Evonik could cash in proceeds of approximately €1.8bn in a “straight sale” of its methacrylates businesses.

The figure would represent a multiple of six times (6x) the enterprise value (EV) in relation to earnings before interest, taxes, depreciation and amortisation (EBITDA).

Bernstein added that strategic moves such as the MMA/PMMA divestment would be a catalyst for Evonik’s shares to have a positive performance, and it maintained its rating for the firm’s stock with an ‘Outperform’ valuation and a 12-month share price target forecast at €36.

Following the publication of its results and the announcement on methacrylates, however, Evonik’s stock was losing 3.3% of its value compared to the last close, trading at €29.07 by 12.15 CET.

Evonik also reiterated its intention to optimise its administrative and sales processes to reduce costs by €200m/year by the end of 2020.

“Cost disciple is an important success factor and is becoming part of our corporate culture,” said Kullmann, pictured.

“Selling and administrative expenses must not be allowed to rise faster than sales. This is why we are now taking action worldwide, in a socially acceptable manner.”

The company stressed that it will not undertake and business-related dismissals of employees in Germany and announced that a corresponding agreement with the German works council has been extended until the end of 2021.

By Niall Swan

Source: ICIS News

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