Solvay's acquisition of Rhodia a perfect match for both – analyst

24 May 2011 16:45  [Source: ICIS news]

SolvayLONDON (ICIS)--Belgium-based Solvay’s proposed acquisition of French chemicals maker Rhodia would be a perfect match for both companies, an analyst said on Tuesday.

Solvay’s €3.4bn ($4.79bn) offer is being finalised and is expected to be completed by the end of August, subject to approval.

Klaus Ringel, a research analyst for Germany-based equity broker Cheuvreux, part of the Credit Agricole Group, said Solvay’s market position is very attractive as Rhodia looks for a partner to “leverage technology”.

Ringel said the combined company could become a major player in the European market and extend its chemical and plastics footprint into Asia and other emerging markets.

“Rhodia has a very strong footprint in Asia and this is where, generally, chemical companies from Europe are seeing future growth,” he added.

Earlier in May, the French Financial Markets Authority approved Solvay’s offer to acquire Rhodia. The deal – subject to approval by French supervisory authority Autorite de Controle Prudentiel and the French minister of the economy – is on schedule, the next step being an informal tender offer to Rhodia’s shareholders in June.

Ringel highlighted Rhodia’s strong footprint in plastics in Europe, especially in the polyamide (nylon) area with polyamide 6,6.

On 12 May, an equity research report by European banking and financial group BNP Paribas said Solvay would largely increase its exposure to emerging markets through the acquisition of Rhodia.

The report estimated Solvay’s sales to emerging markets were 25% of group sales, below the sector average of about 30%, while Rhodia’s stood at 45%. The report said the new entity would have about 35% exposure to emerging markets.

“Solvay’s share will notably increase in Asia/China and so, to some extent, in Latin America, where Solvay already has a large position in the Brazilian and Argentinian [polyvinyl chloride] PVC markets,” the report stated.

Ringel thinks the planned acquisition of Rhodia would be a lucrative deal for Solvay, with the company “getting a good product portfolio with an attractive geographical footprint at a reasonable price”.

Solvay is a major producer of soda ash, hydrogen peroxide, speciality polymers and polyamide intermediates products, as well as PVC and consumer chemicals used in shampoo and shower gel.

($1 = €0.71)

For more on Rhodia and Solvay, visit ICIS company intelligence

By: Tanzeel Akhtar
+44 208 652 3214

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