12 November 2001 00:00 [Source: ICB Americas]Opponents in Finland to the planned takeover of state-controlled Kemira claim they now have enough political support to block the deal.
Industri Kapital, the Sweden-based equity fund company, reached an agreement with the Finnish government in September under which it will acquire the Finnish state's 56 percent stake in Kemira.
A new Nordic specialty chemicals group, in which Finland would have a 34 percent stake, would then be formed by merging Kemira with Dynea and Sydsvenska Kemi, comprising Perstorp and the Neste oxo alcohols operation. Both Dynea and Sydsvenska Kemi are controlled by Industri Kapital.
The deal, which has to be approved by the Finnish parliament, has run into fierce opposition among trade unions, farmers, environmentalists and other groups. They are worried about job cuts and the future of Kemira's operations in fertilizers and paints.
Industri Kapital has stated that Kemira's fertilizer and coatings activities would be noncore in the new group, which will have pro-forma sales of around á4.3 billion ($3.9 billion).
"We estimate that over 100 members will now vote against the agreement in the 200-seat parliament when it is debated in about three weeks," says Tuomo Lilja, spokesman for Kemian-liitto, the Finnish chemical workers union, which is leading a campaign against the deal.
In addition to the opposition Centre Party, with around 50 seats in the parliament, members of the assembly belonging to the Social Democratic, Conservatives and leftwing parties in Finland's ruling coalition are also hostile to the takeover, according to Kemianliitto.
"This is not an ideological matter," says Mr. Lilja. "A financial consultancy we commissioned to look at Dynea has concluded that it is in a poor financial state with large debts. There will be a loss of jobs, but the deal does not make business sense either."
The government has been quiet about the agreement, with only Trade Minister Sinikka Monkare, who negotiated it, speaking out in favor of the deal. But observers believe the government could make new proposals to win more backing for the sale.
"One possibility is that the government will suggest that it takes over Kemira's fertilizer business, which will please the farmers and rural communities supporting the Centre party," says one Finnish analyst. "There are political issues which can be resolved so it will go through eventually."
Kemira last week reported a 53 percent fall in operating income to á16 million during the third quarter of this year with sales flat at á566 million. During the first nine months, operating income dropped 7 percent to á127 billion with sales decreasing 3 percent to á1.8 billion.
The plant nutrients operation recorded an operating loss of á10 million after a 14 percent fall in sales to á229 million during the third quarter. Fertilizer production had to be curtailed following a slowdown in sales in September.
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