News

Arkema to focus on specialities after Vinyl Products sale

Arkema is to divest its Vinyl Products business segment in order to focus on its two other more speciality-oriented businesses

FRANCE-CHINA

Arkema is to divest its Vinyl Products business segment to the Klesch Group, a Swiss investment group that is active in oil, gas, transportation, electricity and aluminium, in order to focus on its two other more speciality-oriented businesses, Industrial Chemicals and Performance Products. The plan, which has been presented to the Central Works Council, is subject to legal information and consultation processes with trade unions and to anti-trust approval.

With this change, said chairman and CEO Thierry Le Hénaff, "Arkema would continue to implement its growth strategy in innovative solutions dedicated to sustainable development and in emerging economies. Accordingly, our group should assert its place as a major world player in specialty chemicals."

At the end of 2010, Arkema had reaffirmed a strategy of accelerated growth in the speciality chemicals sectors within Industrial Chemicals and Performance Products, while "continuing to boost the competitiveness" of Vinyl Products. Securing the long-term success of both aspects of the strategy, it said at the time, would require "significant investments", which it is apparently no longer prepared to make.

Le Hénaff - Group will become major player in specialities

With this deal completed and following the integration of Total's resins on a full year basis, Arkema would have pro forma sales of about €6.5 billion this year. It would also give the company "a greater balance by region, reduced cyclicality, and improved profitability," it said. Analysts said that Arkema would have a more attractive investment profile and the stock price should also rise accordingly.

This divestment will led to exceptional net expenses of about €470 million this year, including a cash charge of about €100 million. However, said Société Generale analyst Patrick Lambert, "it's before the large cyclical reversal everyone was waiting for, so even if they pay €100 million to get rid of it, it's not the end of the world".

Vinyl Products generated 19% of Arkema's sales last year, down from 25% in 2005. Sales have bobbed around the €1.1 billion/year mark since 2008 but it has long been unprofitable, despite continued efforts to improve its competitiveness. It made losses of €14 million in 2010 and €31 million in 2009.

All assets in France directly related to chlorine and derivatives, plus global downstream activities in compounds, pipes and profiles, will transfer to Klesch. This does not include the Jarrie facility, whose only related activity, in dichlorothane, is ceasing, while only PVC paste activities in St-Auban are affected. EVA at Balan is not affected at all.

The newly divested operation, based in Lyon, aims to be a major player in the European PVC industry, balancing upstream and downstream activities. No restructuring of the manufacturing plants is envisaged, there will be no redundancies among the 1,780 employees in France and 850 outside who will transfer to Klesch and all terms of existing employment contracts will be maintained.

Earlier in November, Arkema had made smaller moves towards specialities by acquiring two Chinese firms active in biosourced polyamide (PA) 10.10 from Bain Capital and Feixiang Chemicals, itself a subsidiary of Rhodia, and the industrial applications speciality alcoxylates business of its French compatriot SEPPIC, a subsidiary of its compatriot Air Liquide. Both are subject to regulatory approval.

The acquisition of Hipro Polymers, a producer of biosourced PA 10.10 based in Zhangjiagang near Shanghai, and Casda Biomaterials of Hengshui near Beijing, which claims to be the world leader in its precursor, castor oil-derived sebacic acid, which is also used in lubricants, plasticisers and corrosion-inhibiting additives, will cost Arkema €273 million. The two turned over a combined €172 million last year and employ about 750 people.

Arkema is already the world's only producer of PA 11 from castor oil and acquiring Hipro will make it the only chemicals manufacturer to offer a full range of long-chain PAs 10, 11 and 12. It anticipates 15-20%/year growth in speciality biosourced polyamides in the near term.

Terms for the SEPPIC deal were not disclosed. It involves a site in Antwerp employing 50 and generating €47 million last year, which will be integrated with two existing sites in France. This should enable Arkema's Ceca speciality chemicals business unit within Performance Products to expand its speciality surfactants range for niche markets which are growing at about 5%/year, like warm asphalt mix for road construction, industrial detergency and oil and gas.

Alcoxylates are also used in some rheological additives for paints and in ultra-high performance concrete additives for high-technology civil engineering structures, such as high-rise buildings and bridges. Arkema's Coatex subsidiary is already active in rheology additives for a wide range of industries.

 

 

From Online Issue: December 2011