Celanese ponders acquisition

06 September 1997 00:00  [Source: ACN]

CELANESE may look to acquire a petro-chemicals company of similar size to itself to lift its critical mass in global markets once its restructuring into an independent operation under the Hoechst holding-company structure is complete, president Tom Kennedy told ACN.

'We have a strong market-share and technology position in the products we have, but the portfolio is quite narrow,' he said. 'If we had the opportunity to broaden our scope by getting into new areas it would be a very desirable strategy.'

The question is one the company is now considering as it sets up its organisation and strategy for future development.

'There are a large number of companies that we could put on the first page of a target list,' Kennedy said. 'These would be similar-size or smaller companies that are not significantly different from Celanese,' he said.

Celanese starts operations as a standalone company in profit, but it is not cash rich, Kennedy conceded. 'Acquisitions would have to be financed. We have debt on the balance sheet, but not so much as to preclude a debt arrangement,' he said.

An important issue that could be resolved through acquisition is the need for backward integration. This is a key difference between the new Celanese philosophy and the longstanding Hoechst decision to purchase basic raw materials such as ethylene and propylene.

'There are a number of petrochemical companies that we could look at for backward integration as well as broadening our current portfolio,' he said.

'This could mean an investment into a cracker. Hoechst did not consider this a good investment in the past, but it is certainly a possibility that we should look at.'

Olefins markets have changed significantly in recent years, Kennedy explained. In the US, for example, the ratio of merchant to captive supply of ethylene has shifted from 50:50 traditionally to 20:80 now, undermining the desirability of a fundamental buying stance.

Kennedy emphasised, however, that Celanese has not yet drawn up firm acquisition-driven strategies. Its first priority is to organise and restructure existing businesses and prepare a detailed strategy for growth.

An immediate issue is the restructuring of the inorganics business of the former Hoechst Global Basics Chemicals division. The business encompasses sulphur chemicals, phosphoric acids and chloralkali. 'We are looking at each of these as needing significant restructuring,' Kennedy said. He confirmed divestment is an option. The moves should be complete by the end of the year.

'Celanese turnover will be reduced by around US$300m if all of these businesses go, so we are looking at a US$3bn business,' Kennedy said. 'This is not huge in petrochemical terms. There are successful niche companies at this size, but Celanese will have to look at ways to grow.'

• Celanese Asian plans: p40

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