Bloomberg News

Arkema to Unload Vinyls Unit to Investment Company Klesch

November 23, 2011

(Updates with share reaction in second paragraph.)

Nov. 23 (Bloomberg) -- Arkema SA, the French maker of plastics additives, plans to unload its vinyls business to an investment company focused on commodities as it moves toward higher-margin specialty chemicals.

Klesch & Co., a Geneva-based investor in aluminum and oil refining, will take over the unit that generated more than 1 billion euros ($1.3 billion) in sales in 2010, Arkema said in a statement today. Arkema surged as much as 17 percent in Paris trading, the most since April 2009.

Chief Executive Officer Thierry Le Henaff is disposing of the business amid a wider revamp that’s already involved cuts in capacity. The French company sold a PVC pipes subsidiary in France and announced cutbacks at vinyl sites in France and Spain in a market characterized by high feedstock and energy costs as well as competition from Asian suppliers.

“It’s a business where you really need to roll up your sleeves and get on with restructuring,” said Ariel Levin of Valence Group, an investment bank which advised on a recent PVC deal. “A meaningful restructure isn’t really an end game for Arkema. It was clear they were going to look for an exit.”

Management at the French company met with employees this morning. Colombes, France-based Arkema will provide the business with a “strong” balance sheet, and will book 470 million euros in expenses, it said.

Drag Removed

Shares of Arkema had been suspended in Paris prior to the announcement. The stock advanced as much as 6.8 euros to 46.5 euros, and traded at 45.75 euros as o 1:08 p.m. in Paris.

The vinyl operation, which makes the basic materials for PVC, a plastic used widely in construction and food-packaging, accounted for about 15 percent of overall sales and third- quarter revenue declined to 278 million euros from 284 million euros.

“It has been a drag since 2008, the last good year was 2007,” said Patrick Lambert, an analyst at Societe Generale.

Lambert said a sale or restructuring of vinyls would be “extremely positive” for Arkema, whose shares have declined 25 percent this year.

Arkema this week announced a plan to plough $365 million into the purchase of two companies based in China making biosourced polyamide and sebacic acid used in the production of performance polymers. It also purchased resin units from its former parent company Total SA for 550 million euros.

The divestment mirrors that of Tessenderlo of Belgium, which sold its PVC and chlor-alkali assets earlier this year to Ineos Group for 110 million euros.

Arkema will have explored all options for exiting the business prior to reaching an agreement with Klesch, Levin said. Potential buyers for Arkema’s unit had dwindled with Ineos investing in an alternative asset and Asian companies seeking businesses with the latest technology that are more environmentally friendly, according to the investment banker, which helped advise on Tessenderlo’s PVC disposal.

--With assistance from Francois de Beaupuy in Paris. Editor: Benedikt Kammel

To contact the reporters on this story: Andrew Noel in London at anoel@bloomberg.net; Morwenna Coniam in London at mconiam@bloomberg.net

To contact the editor responsible for this story: Andrew Noel at anoel@bloomberg.net


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