03 April 2002 14:42 [Source: ICIS news]
LONDON (CNI)--Fears about the impact on other European petrochemical players of Sabic's Euro2.25bn ($1.96bn) deal to buy DSM's petrochemical assets were raised on Wednesday.
One European analyst said: "What concerns us is the impact Sabic will now have as a domestic producer on businesses such as Solvay and BASF. Sabic are aggressive as importers and we have no idea what their attitude will be as producers."
But Simon Bown, analyst at Credit Suisse First Boston (CSFB) said such fears may only be valid in the long term: "This acquisition gives Sabic a more direct marketing route into Europe and you can be sure that European customers will at least read their price list. If you can convert this better access to utilise cost advantages from the Middle East then it will be a worry for European producers - but this is a long term view."
Guy Phillips, analyst at B&P Paribas said DSM has profited from the deal: "DSM have done well. Our estimated price was Euro1.8bn which was the general market expectation."
DSM has agreed to accept from Saudi Arabia's Sabic half the Euro2.25bn purchase price on completion of the deal - expected by 30 June - with the balance 4.5 years later.
While Phillips has picked up on some market concerns about the deal being staggered, he thinks the company can get around this to more rapidly fund further acquisitions: "There are some concerns that part of the proceeds will not be available for 4.5 years. But they can be creative with this put-option in the same way that Solvay did with the Ausimont deal."
Belgium-based Solvay bought Italian fluorinated specialities company Ausimont in December 2001. It partially financed the deal by setting up a mechanism with a third party to cash in advance the proceeds from exercising a put option with BP in the BP/Solvay polyethylene (PE) joint ventures.
"Strategically this is also a good deal for DSM. Petrochemicals is becoming a global business but they were predominantly a European producer. It would have required substantial investment to have become a global petrochemical business," he added.
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