RAG plans unclear over Degussa sale

03 December 2005 08:44  [Source: ICB]

Clouds seemed to hang over Degussa’s future last week as its workforce sought clarification of what majority shareholder RAG’s plans for the speciality chemical group might entail.

At meetings in Marl, Frankfurt, Hanau and Trostberg, Germany, the works council told employees it had been informed by RAG that the energy group may seek not only to widen its 50.1% majority share, but could possibly acquire all of Degussa.

Tension was already rising after reports leaked to the press suggested that the group – pieced together over the past several years from Degussa, Hüls and SKW Trostberg – could be broken up into its constituent parts once again.

At the meetings, the council said it would ‘vehemently oppose’ a break-up of Degussa. It called on management of both RAG and Degussa to ‘safeguard the substance’ of the chemical group and discuss with employees any changes in the company’s structure that would affect jobs.

The leaked reports said Boston Consulting, engaged by Degussa’s management to review the chemical group’s strategy, had recommended a sale of several businesses, including its building chemicals unit and possibly the fine and industrial chemicals units. Together, these assets represent around 40% of group sales annually.

Analysts said RAG was likely to use proceeds from a sale to buy the 43% stake owned by Eon, which this energy conglomerate plans to sell sometime in 2007.

Something like 7% of Degussa shares are in free float, and its total stock market value is put at €3.5 bn. The chemical group’s management had hoped to increase free float and return to a listing in the German stock exchange DAX top 30 list.

None of the companies involved have been willing to comment on the rumours. Degussa’s supervisory board is due to review the Boston Consulting recommendations on 13 December.

The consultant’s study supplements another corporate review, ‘Degussa 2008’, produced by McKinsey which was aimed at improving the company’s operating profit (Ebit) by €300m.

In early November, Degussa chairman Utz-Hellmuth Felcht said the two programmes could lead to ‘major structural and personnel changes’.

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