Evonik's Speciality Chemicals Strategy Paves the Way for Stock Exchange Float

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Researched by Industrial Info Resources Europe (Galway, Ireland)--Germany's largest stock market flotation in a decade took a significant step closer to occurring this week, when CVC Capital Partners appointed Bank of America Merrill Lynch, Goldman Sachs and Deutsche Bank to manage a Frankfurt flotation of chemicals group Evonik Industries (Essen, Germany). The proposed initial public offering is expected to raise €8 billion ($11.4 billion), valuing Evonik at €20bn ($28.5 billion).

Another milestone was the finalisation of the purchase of the Hanse Chemie Group (Hamburg, Germany) on May 12, this acquisition will allow Evonik to diversify into new markets for speciality applications of silicone chemistry within the construction, automotive manufacturing, dental technology, wind power and photovoltaic industries. In April, Evonik agreed the sale of its industrial carbon division to financial investor Rhone Capital (New York, New York). The transaction value for the carbon black business amounted to more than €900 million ($1.28 billion).

Recently announced expansion plans include an investment of €500 million ($707.5 million) in a new methionine facility in Singapore, which is scheduled to begin producing feed additives in 2014. In addition, capacity for precipitated silicas in Asia and Wesseling Germany will be increased by 25% by 2014. Evonik is also planning to build a new facility for isophorone chemicals, preferably in Asia, to come on stream in 2013. The Group already ranks among the global market leaders in all three of these businesses and now aims to strengthen them selectively in the relevant growth markets.

Evonik Industries AG (Essen) was established from the white division of RAG Aktiengesellschaft (Heme, Germany) in September 2007 as a new industrial group with the business areas Chemicals, Energy and Real Estate. In 2008, Evonik adopted a strategic focus on speciality chemicals, sales of which are less price-dependent and cyclical than commodity chemicals, and an area in which they already ranked among the world leaders. It was envisioned that growth achieved through speciality chemicals, together with the sale of equity and the divestment of assets in the energy and real estate divisions would facilitate a public listing on the Frankfurt Stock Exchange.

To achieve this, the company began to streamline its organisation with some key sales and acquisitions. In 2008, RAG sold a 25.01% stake in Evonik to private equity firm CVC Capital Partners (London, England) for €2.4 billion ($3.4 billion). Toward the end of 2010, 51% of its energy business Steag was sold for €3.8 billion ($5.1 billion) to a consortium of municipal utilities in Germany's Rhine-Ruhr region. In recent months, Evonik announced that it is considering selling a stake of the real estate division of the business. Commenting on the new direction, CEO Klaus Engel said "We want to grow and increase our profitability further. To achieve that, in future the management of Evonik will be geared to making us faster, leaner and more flexible, with an even stronger market focus."

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