* Shares will be held, not cancelled
* Solvay closes sale of drugs unit to Abbott
* To book 1.7 bln eur post-tax gain in Q1
* Will temporarily invest in buyback, treasury instruments
* No decision yet on potential acquisitions
* Shares up 1.3 pct
(Adds Solvay spokesman, analyst comments, shares)
By Aaron Gray-Block
AMSTERDAM, Feb 16 Belgian chemicals firm Solvay
(SOLB.BR) surprised investors with a 356 million euro share
buyback but said it still plans to use a 1.7 billion euro ($2.3
billion) gain from the sale of its drugs unit to finance
Abbott Laboratories (ABT.N) agreed to buy Solvay's
pharmaceuticals unit in September for 4.5 billion euros in a
deal giving Abbott full control of its Belgian development
partner's cholesterol treatments and exposure to emerging
Solvay is to book an after tax gain of 1.7 billion euros
from the sale in the first quarter. Part of the proceeds of the
sale will be temporarily invested in the buyback, and the rest
in short-term German, French, Dutch and Belgian and
highest-rated treasury instruments to spread its risk.
The company reiterated it eventually plans to channel the
sale proceeds, minus restructuring provisions, into high
value-added activities and strategic projects in chemicals and
plastics, geographical expansion into growth regions and
activities and new products with low energy footprint.
"Studies about such reinvestments are ongoing," Solvay said.
Solvay said it intends to buy back a maximum of 5.1 million
of the company's shares, starting on Tuesday.
Based on Monday's closing share price, the share buyback is
valued at about 356 million euros, leaving about 1.34 billion
euros for the government treasury investments. Solvay declined
to say whether it would use all of the proceeds.
Spokesman Erik De Leye said the buyback should be seen as a
temporary placement of its cash because the company does not
intend to cancel the bought shares. Options include later
selling the shares back to the market or entering into
placements, he added.
Analysts said the move was supportive of the company's share
"We believe that the financial market was first anticipating
news regarding an acquisition and maybe returning cash to
shareholders later, so this should come as a positive
surprise," RBS analyst Mutlu Gundogan said.
Solvay shares were up 1.3 percent at 70.75 euros at 0933
GMT, in line with a 1 percent rise in the compared with a DJ
Stoxx European chemicals index .SX4P.
Solvay has repeatedly said it would not make any
acquisitions until it had banked the cash from the drugs unit
sale, but several companies have been speculated as possible
These include Belgium's Umicore (UMI.BR), Swiss speciality
chemicals maker Clariant CLN.VX and German scents and aroma
specialist Symrise (SY1G.DE), while Rabo Securities said it
expects Solvay to acquire assets in emerging markets focused on
clean tech, high performance polymers and biotechnology.
"We give no timeframe on acquisitions, we have some ideas
... but will not comment further. We do not dislcose our cards
in this game," spoksman Erik De Leye said.
In a separate statement, Abbott said it expects the
acquisition to add approximately $2.9 billion to Abbott's 2010
total reported sales.
(Editing by Erica Billingham and Andrew Callus)