* To sell 600 mln euro bond exchangeable into Evonik shares
* RAG seeks to diversify away from chemicals
* Says has free rein to cut Evonik stake to 60 pct
* Foundation also considering 1 bln euros of investments
(Recasts lead, adds details on RAG investment plans, board of
By Matthias Inverardi and Ludwig Burger
FRANKFURT, June 4 The RAG Foundation, a German
public-sector trust, said it would reduce its stake in Evonik
as it balances the need to diversify its investment
risks with the desire to keep control over Germany's
second-largest chemical maker.
The foundation's head, former German economic affairs
minister Werner Mueller, said on Wednesday RAG's executive board
had received the go-ahead from trustees to cut its Evonik stake
to 60 percent over the medium term, from 68 percent currently.
But he added the foundation would be careful not to depress
Evonik's share price when doing so.
As part of its plan to reduce its exposure, it will issue a
bond that can be swapped for shares in Evonik, a maker of
high-tech plastics, feed additives and clear acrylic sheet. It
did not specify how it planned to reduce its Evonik stake beyond
The seven-year-old foundation has its roots in Germany's
main hard-coal mining company Ruhrkohle AG, which diversified
into chemicals when it bought Evonik's predecessor company
The trust's main purpose is to finance the future cost of
keeping Germany's abandoned coal mines from caving in but since
its board of trustees is dominated by federal and regional
government officials as well as unions, RAG is also keen to
secure Evonik's more than 20,000 jobs in Germany.
According to RAG's articles of association, it has to hold
on to at least 25.1 percent of Evonik.
Mueller separately said that acquisitions worth about 1
billion euros ($1.36 billion) were being vetted by the executive
board. Investments would be in sectors "as far away from
chemicals as possible", to hedge RAG's risks, he added.
RAG will issue bonds worth as much as 600 million euros
($680 million) that can be exchanged for a total of about 3
percent of Evonik's share capital. They will be offered to
institutional investors outside the United States with the help
of Bank of America Merrill Lynch and UBS.
The exchangeable bond is due to be priced later on Wednesday
- but a source familiar with the transaction said it would carry
a zero percent coupon. The source added that the exchange price
of the bond would be set at a 37.5 percent premium above the
stock's volume weighted average price over a certain trading
Evonik has said repeatedly that majority owner RAG and CVC,
the buyout firm that holds an 18 percent stake, are looking to
reduce their holdings over the medium term.
The exchangeable bonds mature at the end of 2018, but from
July 2017 RAG can opt not to swap them for Evonik shares if the
share price trades at 30 percent above the exchange price over a
certain period which is to be specified.
RAG said it had total assets worth about 12.5 billion euros
at the end of last year, with the Evonik stake - worth 9.1
billion euros at current market value - accounting for the
RAG said it would need to stump up about 220 million euro
per year from 2019 to maintain Germany's abandoned coal mines,
which mainly involves pumping out the ground water that
($1 = 0.7342 Euros)
(Editing by Harro ten Wolde and Pravin Char)