FOCUS: RAG unveils Degussa takeover plan

20 December 2005 10:56  [Source: ICIS news]

By Dede Williams

FRANKFURT (ICIS News)--RAG confirmed late on Monday its long-anticipated plans to take over all of German speciality chemicals producer Degussa, effective from 1 July 2006.

The German coal and energy group, which owns 50.1% of Degussa, said it will offer the other large shareholder, compatriot energy group Eon, Euro31.50 per share for a total purchase price of Euro2.78bn ($3.36bn). Including the shares in free float, RAG will pay Euro3.38bn for Degussa.

To facilitate a squeeze-out, free float shareholders (which hold 7% of Degussa's equity) will be offered Euro42 per share. Eon’s stake in the chemicals group will not participate in the offer.

The takeover price for the Eon stake represents a premium of 8.6% on the Degussa share price before news of the deal emerged.

Analysts said RAG, which is headed by chairman Werner Müller, is likely to have little trouble raising funds for the acquisition. The Degussa supervisory board, of which Müller is chairman, last week authorised the company’s management to sell its construction chemicals division. Chemicals giant BASF is seeking exclusive negotiations on the sale.

RAG is also expected to sell some of its own assets, including a gas producer and a waste incineration company.

The full integration of the chemicals producer into RAG will “assist in the entire group’s orientation towards a value based and growth oriented development,” Müller said in a statement.

RAG is planning an initial public offering (IPO) for 2007 and needs Degussa to enhance its attractiveness to investors.

“Key terms” of the planned deal, which Müller called “a milestone in our going public plans”, are outlined in a memorandum of understanding signed on Monday by the supervisory boards of RAG and Eon.

The offer document, to be published in January 2006, will contain an adjustment clause ensuring that shareholders tendering in the initial phase do not receive less than those squeezed out later. 

The takeover of Degussa will “economically enhance” the Ruhr region, the state of North Rhine Westphalia and Germany as a whole, said Müller, declaring that “this is the decisive prerequisite to securing jobs”.

The offer and the agreements between RAG and Eon are subject to approval by the German government and the state of North Rhine-Westphalia.

On Monday, the city council in Marl, Germany – one of Degussa’s biggest production sites – called on the energy group to preserve the company’s substance.

In its own statement, Degussa said it welcomed the RAG takeover, as this will establish “a fundamental basis for a stable shareholding structure”.

The union IG BCE said integration of Degussa into RAG will give the chemical group “good perspectives for the future”.

By: Dede Williams
+44 20 8652 3214

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