Altana AG, the German specialty chemicals maker owned by billionaire Susanne Klatten, may look again at buying parts of U.S. rival Rockwood Holdings Inc. (ROC:US) after it abandoned a bid for the whole company in 2008.
“There are parts that interest us and parts that don’t interest us,” Chief Executive Officer Matthias Wolfgruber, 59, said in an interview at Altana’s headquarters in Wesel. “When a specialty chemicals asset comes on the market we will look at it and if we have an interest we will join the bidding.”
Altana, which Klatten delisted from the stock market in 2010, aims to add a fifth division and has 1.5 billion euros ($2 billion) available for purchases. The company, which is also expanding its pigments, coatings, additives and electronic insulation materials units and plans a sixth production site in China, systematically screens the market for targets that can reach a leading position in their segment, the CEO said.
“We are searching,” said Wolfgruber, who studied chemistry and did a research fellowship at the University of California, Berkeley. “The difficulty is that it’s not just about knowing what you want, there has to be the readiness to sell at the right price,” he said, adding that “it’s often the case that units aren’t strategic for another company but they have good earnings and so they don’t give them up.”
Rockwood Chairman and CEO Seifi Ghasemi said in February he hired Lazard as he’s exploring options for three of his five units. The company, based in Princeton, New Jersey, may sell its additives unit as well as titanium-dioxide operations and a ceramics business. Ceramics wouldn’t be a good fit for Altana as it’s more an engineering technology than a chemicals business, Wolfgruber said.
“Altana would be interested in real specialty businesses and wouldn’t look at anything that is a commodity,” said Markus Mayer, a analyst at Kepler Capital Markets who used to cover Altana when it was traded on the stock market. “Rockwood has some nice additive businesses. Iron-oxide pigments would make sense. Wood treatment would be interesting too.”
Rockwood’s performance additives unit has annual sales of $731.5 million and a margin of 17 percent, based on earnings before interest, taxes, depreciation and amortization. The division makes iron-oxide pigments and clay-based additives and is the number two globally in those businesses. It also makes ingredients for wood protection, where it is the leading producer, Rockwood has said.
Altana abandoned a bid for Rockwood in 2008 after the potential purchase leaked to the press, sending Rockwood’s price soaring, Wolfgruber said. The bid was abandoned early that year, which in hindsight was probably better because the global financial crisis came a few months later, the CEO said.
Altana is also investing into its existing four business units, Wolfgruber said. A new production site in China is planned to make wire enamel for electric motors, in which the German company will invest a low “two-digit-million” euro amount, the CEO said.
The factory will be in Tongling in the Anhui province and will be Altana’s sixth production site in the country.
There is potential to expand the Actega unit, which makes coatings and sealings for the packaging industry, in Asia, Wolfgruber said. Consumers in China are increasingly switching to packaged food from unpackaged produce bought at markets, spurring demand for sealing compounds.
As well as looking for larger deals, the company, which has bought about 30 companies in the last 10 years, will continue to make smaller bolt-on purchases, the CEO said. In December he agreed to buy Chemical Corporation of America Inc.’s wax additive operations, with annual sales of $17 million, and in May, Altana bought Marbo Group’s casting resins business for encapsulation and coating of electronic components.
Altana’s roots go back to 1873 when Heinrich Byk founded an eponymous company to produce chemicals for industrial use in Berlin. In 1941, Guenther Quandt, Klatten’s grandfather, took over a majority stake in Byk. From 1977, the company became part of the newly formed Altana.
Klatten, Germany’s richest woman and an heiress of the Quandt family that holds about 47 percent in Bayerische Motoren Werke AG, offered about 910 million euros in cash for the rest of Altana AG in 2008.
Altana, which predicts sales to rise 1 percent to 5 percent this year amid stable profit margins, said its forecast doesn’t include any potential acquisitions. The company posted earnings before interest, tax, depreciation and amortization of 323.2 million euros on revenue of 1.7 billion euros in 2012.
Asked how much he would spend to add a fifth division, Wolfgruber said that any deal only makes sense if the price is right and he doesn’t pay too much.
“In economics it’s about growth and margins and the optimal combination of those,” he said. “You can only create value with a certain price. If you pay more you can’t create any more value.”
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