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June 1 (Bloomberg) -- Lanxess AG, the German chemical maker spun off from Bayer AG in 2005, is weighing a purchase of Belgian rival Taminco BV in a transaction valued at about 1 billion euros ($1.4 billion), three people familiar with the talks said.
Leverkusen, Germany-based Lanxess has hired JPMorgan Chase & Co. to explore a takeover of the Ghent, Belgium-based company, said the people, who declined to be identified because the discussions are confidential. Lanxess isn’t the only company considering an offer and the negotiations aren’t exclusive, one of the people said.
Taminco owner CVC Capital Partners Ltd. is working with Bank of America Corp. and Goldman Sachs Group Inc. to assess interest in the business, three people with knowledge of the matter said in April.
Buying Taminco would mark the biggest purchase yet for Lanxess Chief Executive Officer Axel Heitmann. Taminco would add amine derivatives that are used in products from crop protection to paint and cosmetics to Lanxess products that include plastics, rubber, intermediates and specialty chemicals.
“Taminco and Lanxess have a good strategic fit,” said Peter Spengler, an analyst at DZ Bank AG, who has a “buy” rating on the stock. “The acquisition track record of Lanxess is excellent so far.”
Lanxess rose as much as 96 cents, or 1.6 percent, to 60.95 euros, and traded at 60.85 euros as of 9:49 a.m. in Frankfurt. The stock has gained 2.9 percent in value so far this year, for a market value of 5.06 billion euros.
Lanxess spokesman Rudolf Eickeler declined to comment, as did Taminco spokeswoman Isabelle De Scheirder and a spokeswoman for CVC. The Financial Times Deutschland reported late yesterday that Lanxess is considering the transaction and may also be weighing other targets.
Taminco Chief Executive Officer Laurent Lenoir said in March that he gets regular calls from suitors checking in after the cancellation of a $600 million initial public offering last year. Lanxess has a medium-term earnings target of about 1.4 billion euros, a goal that Heitmann said earlier this month he’d seek to achieve with the help of acquisitions.
First-quarter net income at Lanxess jumped to 166 million euros from 104 million euros a year earlier. The chemical maker is rated Baa2 at Moody’s Investors Service and an equivalent BBB by Standard & Poor’s.
In Europe, Taminco’s main competitor is BASF SE. Taminco was spun off from UCB SA in 2003. The company is active in Asian markets, which makes it attractive to makers of intermediate chemicals in the region as they seek to add domestic production,
Taminco has reduced debt to 3.2 times earnings before interest, taxes, depreciation and amortization, a ratio implying borrowings of about 510 million euros. Ebitda rose 14 percent to 159 million euros last year.
A purchase of Taminco would add to a flurry of deals in the chemicals industry, as demand rebounds from customers in the manufacturing, automobile and personal-care industries.
BASF last year purchased Cognis GmbH for $4.3 billion, followed by Berkshire Hathaway Inc.’s acquisition of Lubrizol Corp. for $9 billion three months later. Solvay SA, the world’s biggest soda-ash maker, announced the acquisition of Rhodia SA last month, and Ashland Inc., the maker of Valvoline motor oil, agreed today to buy closely held International Specialty Products Inc. yesterday for $3.2 billion in cash.
Laxness completed its acquisition of DSM’s elastomer business for $415 million in March, adding technology to lower production costs of the material used in cars, cables and construction. The German chemicals maker also bought Brazilian rubber maker Petroflex Industria & Comercio SA in 2008 to boost its presence in South American markets.
--With assistance from Angela Cullen and Sheenagh Matthews in Frankfurt and John Martens in Brussels. Editors: Benedikt Kammel, Heather Harris
To contact the reporters on this story: Aaron Kirchfeld in Frankfurt at firstname.lastname@example.org; Andrew Noel in London at email@example.com
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