Arkema removes negative influence with vinyls divestment – bank

24 November 2011 10:55  [Source: ICIS news]

LONDON (ICIS)--France’s Arkema has removed a major negative influence on its valuation by announcing the planned disposal of its vinyls business to the privately owned Klesch Group, investment bank JP Morgan Cazenove said on Thursday.

The chemical major announced on Wednesday that it plans to divest its vinyl business to Switzerland-based investment group Klesch so it can focus on its industrial chemicals and performance products segments.

The bank said that Arkema share prices climbed yesterday on the back of the announcement.

“In our view, investors will welcome the news that the much-discussed and capital-intensive vinyls business is exiting, allowing Arkema to concentrate fully on growing its two core areas. Removing Vinyls, a heavily European business, improves the group sales by region profile,” the bank said.

“Even allowing for continued investor concern about the earnings’ outlook for chemical businesses in 2012, momentum is likely to turn more positive on Arkema now that Vinyls is going, and over time drive the valuation up from current depressed levels,” it added.

A market source said on Wednesday that they did not believe that Klesch will continue to run the vinyl segment as it is.  

Another market source said: "They [Klesch] are trying to grow as a conglomerate ... they are also in the process of taking over a refinery [on] the UK’s east coast.”

A third source said: "I’m not surprised that Arkema wants to sell ... but I would not want to buy any ethylene dichloride [EDC] business at the moment.”

JP Morgan Cazenove has upgraded Arkema’s rating to “overweight” from “neutral” and a target share price of €80 ($107), up from €70.

At 10:21 GMT on Thursday, Arkema’s stock was trading at €49.68 on the London Stock Exchange, up from €45.25 at the previous close. The stock had closed at €39.71 on Tuesday 22 November.

Additional reporting by Abache Abreu

($1 = €0.75)

By: Leigh Stringer
+44 208 652 3214

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