Styrolution sees co-owner Ineos buying firm outright next year

FRANKFURT Wed Aug 28, 2013 1:00am EDT

FRANKFURT Aug 28 (Reuters) - Styrolution, a Germany-based plastics maker jointly owned by BASF and Ineos, expects Ineos to exercise an option next year to buy out BASF.

As part of the joint-venture agreement struck in October 2011, Ineos holds the right to buy BASF's 50 percent in Styrolution, a maker of plastics used in car front grills, food packaging and Playmobil toys, from February 2014 onwards.

BASF, in turn, has the right to sell its half in the world's largest styrenic plastics maker to its British co-owner from October next year.

"I consider Ineos to be very interested. That has been voiced clearly," Styrolution Chief Executive Roberto Gualdoni said at a media briefing.

The co-owners have agreed that any future transaction would value the venture at a fixed multiple of adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA), which the CEO said was in a range of 5-7, declining to specify.

Since the group, with 6 billion euros ($8 billion) in sales last year, aims to boost profits further, it would be in Ineos's interest to exercise its option early on, Gualdoni said.

Styrolution made an adjusted EBITDA of 335 million euros in 2012.

"The decision on a sale will be made depending on how much trust there is in my words. But I believe our credibility is quite high," the CEO said.

A spokesman for Ineos said the firm had not made any decision yet on exercising its options.

Styrolution aims to grow its margin of adjusted EBITDA over sales to at least 10 percent by 2020 from about 6 percent currently by growing in emerging markets and focusing on plastics that are tailored to customer specifications, among other measures.

The global average for EBITDA margins in the chemical industry is 10 percent, according to Thomson Reuters StarMine data.

BASF and Ineos pooled their styrenics businesses in 2011 to better compete with low-cost Asian rivals, with BASF saying at the time it was eventually eyeing a complete exit.

Gualdoni added that an initial public offering or a sale to another chemical maker could be on the cards for Styrolution but such a decision would be made in 2015 at the earliest.

While the group, which competes with the petrochemicals arms of oil majors Royal Dutch Shell and Total, relies on organic growth to reach its 2020 targets, it is looking for takeover targets to boost its position in some emerging markets.

Gualdoni described the company's presence in Asia as "a starting position" that could benefit from an acquisition.