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UPDATE 1-Clariant to kick off sale of 3 chemical units -sources
August 13, 2012 / 2:25 PM / 5 years ago

UPDATE 1-Clariant to kick off sale of 3 chemical units -sources

* Info memoranda to go out as early as this month -sources

* Units for sale have combined revenues of $2 billion

* Citi mandated to organize the auction

* Bidders likely to offer a price of 4-5 times EBITDA -source

FRANKFURT, Aug 13 (Reuters) - Swiss chemical firm Clariant AG may struggle to find a buyer for three businesses with combined revenues of $2 billion it is preparing to put up for sale, people with knowledge of the plan said.

As early as this month, the group plans to send out information memomranda on the units which produce chemicals for the textile and paper industries as well as emulsions used as raw material in paints and adhesives, the people said.

Clariant is seeking to derive 70 percent of revenues from products whose demand is unaffected by economic cycles as part of a revamp of its business.

Part of that new strategy is the divestment of low-margin businesses like the Textile Chemicals, Paper Specialties and Emulsions, Detergents & Intermediates units.

Citi has been mandated to organise the auction and a first deal could be reached within the next six months, one of the sources said.

Bidders were likely to offer 4-5 times earnings before interest, taxes, depreciation and amortization (EBITDA), a different financial source said.

Clariant Chief Executive Hariolf Kottman said in June that the company was planning to sell the units or find a joint venture partner for the operations within the next 18 months.

“We have started with pre-marketing activities to evaluate the market for possible strategic options,” he said at the time.

A Clariant spokesman said everything except closure was possible for the units.

Despite restructuring efforts Clariant sees no possibility of getting the units’ profitability close to the group’s target of an EBIT-margin of 17 percent by 2015.

People close to the project said it may prove difficult to find prospective buyers.

“It will not be an easy sell,” one of the people said, adding that rival BASF last year failed to sell a similar business: its leather chemicals operations.

For Clariant’s Textile Chemicals unit, Asian players may show interest as most of the world’s textile production has shifted to Asia in recent years, an investment banker with knowledge of the industry said.

Clariants’s Textile Chemicals unit employs 2,100 staff and in 2011 posted sales of 675 million Swiss Francs ($690 million) and adjusted EBITDA of 34 million Sfr.

For Clariant’s Paper Specialties unit, rivals like BASF or U.S.-based Ashland - with which Clariant already works in foundry chemicals - may show interest, the banker said.

He added competition issues may arise, as the market is already dominated by six big producers - BASF, Ashland, Finland’s Kemira, Dutch Akzo Nobel, French SNF and U.S.-based Buckman Laboratories.

Clariant’s Performance Chemicals unit, which includes the Paper Specialties unit, the Emulsions, Detergents & Intermediates operations and the Additives business, posted sales of 1.3 bln Sfr and adjusted EBITDA of 177 million in 2011.

While the Additives business has been a growth driver, Paper Specialties’s sales slumped last year.

Citi, BASF and Ashland declined to comment.

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