RAG rejects claim that CVC has ‘secret rights’ over Evonik

12 August 2010 18:31  [Source: ICIS news]

TORONTO (ICIS)--RAG-Stiftung, the majority owner of German specialty chemicals major Evonik, rejected on Thursday a newspaper report claiming that private equity firm CVC had “secret and special rights” over Evonik.

German business daily Handelsblatt said in a report that as part of CVC’s €2.4bn ($3.1bn) acquisition in 2008 of a 25.01% minority stake in Evonik, CVC was given “comprehensive veto rights” over acquisitions, investments and divestments that would lower Evonik’s value in the eyes of outside investors.

RAG-Stiftung is a coal foundation that is charged under a law – the German “Steinkohlefinanzierungsgesetz” – with overseeing the phase-out of the country's subsidised hard coal production by 2018.

Proceeds from an eventual sale or initial public offering of Evonik are meant to help pay for environmental costs and liabilities associated with the phase-out. If the proceeds do not cover the costs, German taxpayers would likely have to make up the difference.

In a statement to ICIS, RAG said while CVC had certain rights as a minority stakeholder, those rights would not devalue Evonik.

Both RAG and CVC were interested in floating Evonik in an initial public offering and it would thus be “counter-productive” for them to have made an agreement that devalued Evonik, RAG said.

In cases of conflict over strategic decisions at Evonik, the agreement with CVC provided that RAG’s interests could not be overruled, it said.

RAG added that German state auditors in a recent report supported RAG’s policies and strategies regarding Evonik.

Handelsblatt, in its report, said that without the consent of CVC, neither Evonik’s supervisory board nor its general meeting could make decisions over larger acquisitions, investments or divestments.

The paper, which cited a “secret stakeholder agreement” between RAG and CVC it said it had obtained, as well as lawyers’ opinions, said that those rights went beyond the scope of the rights of a typical 25.01% minority stakeholder under German law, and as such effectively reduced the value of RAG’s remaining stake.

In related news this week, Evonik reported second-quarter net profit of €240m, up from €89m during the same period last year on further improvements in its operating business.

($1 = €0.78)

For more on Evonik and other producers visit ICIS company intelligence
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By: Stefan Baumgarten
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