BASF/Ciba benefits Nalco, Albemarle - analysts

15 September 2008 21:31  [Source: ICIS news]

NEW YORK (ICIS news)--US specialty chemical firms Nalco and Albemarle will benefit from Germany-based BASF’s planned Swiss franc (Swfr)6.1bn ($5.4bn, €3.8bn) acquisition of Switzerland’s Ciba Specialty Chemicals, Wall Street analysts said on Monday.

“Generally, we think this is a positive for Nalco, Albemarle and other US specialties,” said Citigroup analyst PJ Juvekar. “We always thought Ciba was focused on gaining market share and competing on price. We believe BASF will focus on other important metrics like return on capital, as well as innovation and growth.”

Nalco competes with Ciba in paper chemicals. Ciba’s paper and water treatment segment represents 39% of Ciba’s total annual sales, while paper chemicals comprises 20% of Nalco’s sales, Juvekar said.

“The BASF/Ciba deal is positive for Nalco,” said Jefferies analyst Laurence Alexander. “BASF is a good competitor - they don’t fight for market share, but rather price their products based on the value-added.”

Ciba competes with Albemarle in plastic additives. The business represents 33% of Ciba’s sales and 39% of Albemarle’s, according to Citigroup’s Juvekar.

“Albemarle has been the price leader so far in this business, and BASF will add its heft and innovation to the industry,” Juvekar said. “We think the acquisition will help rationalise the market.”

BASF is offering to buy Ciba for Swfr50/share, a 32% premium to the company’s previous stock price. It needed to pay a high premium to get Ciba management on board, John Roberts said, an analyst with Buckingham Research.

“Swiss law only allows friendly deals - you can’t attempt a hostile takeover there, like BASF did with Engelhard,” Roberts said. “That’s what they had to pay to get Ciba management support.”

($1 = Swfr1.13 = €0.70)

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By: Joseph Chang
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