Evonik eyes DSM takeover, reports say

 

 
 

 

Germany's second-largest chemical maker Evonik Industries AG is mulling over the acquisition of Dutch competitor Royal DSM NV, people familiar with the matter told Bloomberg.

 

Evonik is talking to advisers about the potential deal, which would create a company with about EUR22 billion (US$28 billion) in sales, as well as analysing other takeover options.

 

The Heerlen, Netherlands-based company had earlier rejected an approach by Evonik at the beginning of this year. The talks fell apart because the management of the Dutch company was concerned about relocating to Germany, adopting the corporate governance structure there and the strategic fit.

 

Apart from DSM, the German company is evaluating companies such as Croda International Plc of the United Kingdom and Switzerland's Clariant AG.

 

While Evonik is exploring the idea of acquiring all of DSM, which has a market value of EUR9 billion (US$11.3 billion), it is most interested in the nutrition division, which supplies ingredients for health supplements and personal-care products. Therefore Evonik would consider buying parts of DSM to get around the issue of being based in Germany, or could also buy all of the Dutch firm and then sell off parts.

 

However, Evonik spokeswoman Barbara Mueller denied any plans or considerations to buy DSM, saying "that is definitely not the case and there are no talks." Representatives for DSM, Clariant and Croda declined to comment on whether Evonik is evaluating them as a takeover target. Clariant spokesman Kai Rolker added that the Swiss company is "convinced that we can create the highest value for all stakeholders as an independent company."

 

Evonik Chief Financial Officer Ute Wolf said this month that the Essen-based company has the resources to execute a sizable acquisition and issuing equity to pay for a purchase is a possibility. The company is seeking growth through purchases for its consumer, health and nutrition unit. DSM would offer products ranging from vitamins to omega-3 and plastics to resins.

 

DSM recently became the target of activist investor Third Point LLC, the hedge fund led by Daniel Loeb. Third Point justified taking a stake in DSM by highlighting the large potential value that could come from breaking up the materials and nutrition divisions. The New York-based hedge fund is one of the largest shareholders of DSM, having a stake of more than 3%. The fund is pushing the Dutch company to focus on nutritional additives.

 

In the event of any takeover bid, DSM would have to support it because of the company's shareholder structure.

 

CEO Klaus Engel is currently reorganising Evonik, making its three main divisions - Consumer, health and nutrition; Resource Efficiency; Specialty Materials - separate legal entities to give them more independence.