Celanese to sell Polyplastics stake for $1.575bn after lagging performance

Author: Al Greenwood

2020/07/20

HOUSTON (ICIS)--Celanese decided to sell its 45% stake in Polyplastics after the joint venture spent years lagging behind the company's other holdings in its Engineering Materials segment, the CEO said on Monday.

Celanese is selling its 45% stake in the joint venture to Daicel for $1.575bn. The deal should close later in 2020.

Polyplastics makes liquid crystal polymers, polyphenylene sulphide (PPS) and polyoxymethylene (POM) copolymer. POM is also known as polyacetal.

With the purchase, Daicel will own all of Polyplastics.

For the past decade the performance of Celanese's stake in Polyplastics lagged behind the rest of its Engineered Materials business, as shown in the following chart.

Source: Celanese

Because of its minority stake and the nature of its rights in the joint venture, Celanese was limited to how much it could influence Polyplastics, according to the company. Business decisions were controlled by Daicel.

"Polyplastics was unique in that it was a very passive investment," said Lori Ryerkerk, CEO. She made her comments during an investor presentation.

'We have limited minority rights, so we didn't have much ability to influence business decisions," she said. "We're not able to apply our commercial model in any way to anything produced within Polyplastics."

Polyplastics operated as an independent company from both a manufacturing and commercial perspective, she said. "We in fact competed with Polyplastics."

Celanese started talking to Daicel about the joint venture in the fourth quarter of 2019, she said. Celanese had looked at acquiring it. At the end of the day, Celanese decided that selling its stake would bring its shareholders the greatest value, she said.

A portion of the funds may also go towards an expended share buy-back programme, with the Celanese board of directors approving a $500m increase in the scheme, representing the planned buy-up of around 5% of the company’s issued share capital.

The approval to expand the programme leaves $1.563bn outstanding in the programme, representing 15% of the company’s shares.

Celanese could spend the remainder of the proceeds on internal projects and acquisitions.

Polyplastics is Celanese's oldest joint venture, being created in Japan in 1964, according to the company. At the time, it was created to give Celanese a presence in Asia.

For Daicel, making Polyplastics a wholly-owned subsidiary will allow the company to accelerate the restructuring of its plastics segment, which accounts for 40% of its revenues, Daicel said.

Additional reporting by Tom Brown

Thumbnail image shows a gear made of polyacetal. Photo by Shutterstock