Bloomberg News

Sibur Close to Fertilizer, Tire Disposals Amid Strategic Refocus

November 24, 2011

Nov. 24 (Bloomberg) -- ZAO Sibur Holding, owned by Russian billionaires Leonid Mikhelson and Gennady Timchenko, is close to securing buyers for fertilizer and tire units as eastern Europe’s biggest petrochemical producer turns to specialty chemicals to accelerate growth, according to an executive.

Deals may be announced before the end of the year, Ilya Gustchin, head of the company’s international division, said in an interview. Sibur is looking for partners to accelerate expansion in specialty chemicals, seeking tie-ups similar to the surfactants joint venture it agreed with Solvay SA’s Rhodia.

“Moving into specialties is one of the opportunities that we are exploring right now,” Gustchin said in the Nov. 22 interview in Frankfurt. “We don’t want to go into specialty chemicals on our own. We really need good partners and a joint venture is a first step for us.”

The plans highlight the ambitions of Mikhelson and Timchenko to diversify and grow Sibur’s operations globally before an initial public offering of the company they took over a year ago. Russia’s abundance of cheap feedstock from western Siberia can make the nation a haven for chemical production rivaling the Middle East, Gustchin said.

Sibur’s tire business, which employs more than 11,000 workers, generated about $840 million in sales last year, excluding the Voronezh and Kirov plants. Fertilizer generated $922 million and has more than 7,500 staff.

Global Ambitions

Sibur produces about 24 percent of Russia’s tires and about 16 percent of the country’s nitrogen fertilizers, according to a company presentation. Eurochem, owned by Andrey Melnichenko, is expanding its nitrogen fertilizer business with the $952 million purchase of BASF SE operations.

Sibur is seeking to tap population growth that will feed demand for materials like polymers, used in cars, bottles and construction. It’s expanding its sales force and technical support in Europe and Asia to boost exports and is planning to open branches in Kiev, Istanbul, China and India, Gustchin said.

Chemicals companies are fighting for market share in emerging markets, where demand is booming for surfactants and other ingredients that enhance oil recovery and boost the efficiency of cosmetics, cleansing products, and pesticides. BASF SE last year purchased Cognis GmbH for $3.8 billion to boost its surfactant operations.

Sibur signed a memorandum of understanding with Rhodia to create a 50-50 joint venture by the end of the year to top the $500 million surfactant market in Russia and neighboring nations, Rhodia said on June 6.

“That’s only the beginning for us,” Gustchin said. “We have a professional team that knows how to invest and to move fast. We want to utilize our cost advantage and move into the downstream.”

--Editors: Andrew Noel, Thomas Mulier

To contact the reporter on this story: Sheenagh Matthews in Frankfurt at smatthews6@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net


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