17 July 2007 16:13 [Source: ICIS news]
TORONTO (ICIS news)--BASF could get an estimated €1.60bn ($2.19bn) for styrenics assets it plans to sell, Citigroup said on Tuesday.
BASF said earlier on Tuesday it would sell selected parts of its styrenics business – with sales of €3.2bn in 2006 - and had already received an initial offer from an unnamed party.
“We estimate that a sale of these commodity styrenic assets should be able to generated proceeds of … about €1.6bn,” Citigroup said in a research note.
The planned disposals were in line with BASF’s strategy to minimise its exposure to a commodity chemical downturn, the analysts said
Following BASF's acquisitions of catalyst maker Engelhard and of Degussa's construction chemicals business last year, the styrenics disposal was a further step in that direction and should be taken well by the market, they said.
BASF would likely use the proceeds for further acquisitions or share buybacks, they added.
Styrenics was one of BASF's only activities not earning a premium to its cost of capital, according to Citigroup.
The problems in styrenics included industry overcapacity, lack of sufficient backward integration to the key raw material benzene, and substitution of the end product, polystyrene (PS), by cheaper packaging materials, Citigroup said.
BASF's US-listed American Depositary Shares were up 0.22% to $136.68/share in Tuesday morning trading in New York.
($1 = €0.73)
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