RAG board said to approve grab for Degussa

19 December 2005 18:29  [Source: ICIS news]

FRANKFURT (ICIS News) --The RAG supervisory board on Monday gave the green light for management to begin negotiations with Eon on acquiring its 43% stake in Degussa, according to press reports.

German coal to chemicals group RAG, which owns 50.1% of the speciality chemicals producer’s shares, is striving to take over the entire company before it carries out an initial public offering (IPO) in 2007. RAG is seeking the IPO to raise cash to pay back coal subsidies to the German federal government. Energy group Eon owns nearly 40% of RAG.

According to unconfirmed reports, RAG chairman Werner Müller presented the supervisory board with a concept for acquiring the Degussa stake. RAG and Eon could not be reached for comment. 

While the two conglomerates are said to be basically in agreement on other points, negotiations on the selling price are thought likely to be tough.

German press reports have quoted Eon chairman Wulf Bernotat as saying that recent speculation over Degussa’s fate has inflated the share price beyond what his group is prepared to pay.

BASF announced last week that it was seeking exclusive negotiations with Degussa about a sale of its construction chemicals business. Both Degussa’s management and employees up to now have opposed selling the building chemicals unit. However, Degussa chairman Utz-Hellmuth Felcht was understood to have agreed to the sale following a meeting last week of the company's supervisory board.

Degussa’s works council announced on Monday it had dropped its opposition if the division is sold to a strategic buyer, rather than a private equity investor.

Some observers have questioned the logic behind selling the profitable business. However, Muller is said to need the cash to help finance the deal with Eon.

The city council in Marl, Germany – one of Degussa’s biggest production sites – has called on RAG to preserve the company’s substance and not destroy its future. The welfare of the chemical industry has always been of interest to the city, which has been a chemical production site for more than 70 years, the council said.

By: Dede Williams
+44 20 8652 3214

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