* No subscription rights for existing shareholders
* Proceeds to fund cost-cutting measures, preserve rating
* Q1 net unchanged, sales down 2.5 pct vs year ago
* Mulls strategic partnerships for rubber unit
(Adds CEO comment on turnaround, details on credit rating)
By Ludwig Burger
FRANKFURT, May 7 Germany's Lanxess,
the world's largest maker of synthetic rubber, said it was
selling new shares equal to 10 percent of its equity to fund
restructuring measures and that it could seek a strategic
partner for its rubber division.
The German company, formerly part of synthetic rubber
inventor Bayer, has been suffering from sluggish
demand for tyres. Asian rivals are challenging Lanxess's
dominant position as both a supplier of rubber and buyer of
butadiene, the main petrochemical used to make rubber.
"We must become significantly more competitive and
profitable again," Chief Executive Officer Matthias Zachert, who
started his job just over a month ago, said in a statement on
Wednesday after the market close.
Lanxess said it was open for potential strategic
partnerships for its rubber division and was considering the
temporary or permanent shutdown of some plants.
The group added it needed to "balance its business
portfolio", which depends on the automotive industry for about
40 percent of revenue, and would reveal more details in the
second half of the year.
Zachert added he primarily had production or marketing
alliances in mind, rather than outright mergers and
Seeking a tie-up with German peers Evonik or
Bayer's MaterialScience unit was not his motive for taking the
top job at Lanxess, but rather overseeing a turnaround, he told
analysts in a conference call.
"It will be a very long and winding road ... This is not
going to be a short-term fix. It will take two to three years."
It mainly makes rubber for tyres, door sealants and
windscreen wipers, but its products also include chemicals for
the treatment of leather and that go into making drugs and
The new shares will be offered immediately to institutional
investors in a private placement, with no subscription rights
for existing shareholders.
Proceeds from the offering will be used to fund
restructuring measures and to help preserve the group's
investment-grade credit rating, Lanxess said.
Standard & Poor's rates the group "BBB", two rungs above
Zachert, who took over as CEO last month, has been outspoken
in criticising cash management under his predecessor Axel
Heitmann, saying too much was spent on new plants and equipment.
Lanxess also posted first-quarter net income of 25 million
euros ($34.8 million), unchanged from a year earlier, coming
below the average analysts' estimate of 38.1 million in a
Reuters poll. [ID:nL6N0NR1F8}
Sales fell 2.5 percent to 2.04 billion euros, compared with
the consensus estimate of 2.08 billion.
Lanxess said that while it expected the economic environment
to slowly recover during the year, competitive pressures would
continue to weigh on synthetic rubber prices.
It gave an outlook for a rise in adjusted earnings before
interest, taxes, depreciation and amortisation (EBITDA) to
between 770 million euros and 830 million euros in 2014, from
735 million last year.
At current market prices, a 10 percent increase in share
capital is worth around 440 million euros.
The new shares will be offered by an international
consortium of banks to institutional investors immediately by
means of a private placement, using an accelerated bookbuilding
The placement price and the proceeds from the issue will be
made public on May 8, 2014, once the price has been fixed,
The banking consortium hired to run the share issue includes
Deutsche Bank and Bank of America, a person
familiar with the matter said.
(Additional reporting by Arno Schuetze, Edward Taylor; Editing
by Philipp Halstrick, Jane Baird and Prudence Crowther)