FOCUS: Solvay Plans New Life As Chemicals, Plastics Play
September 28 2009 - 11:23AM
Dow Jones News
The sale of its cash-cow pharma unit leaves Belgium's Solvay SA
(SOLB.BT) a pure chemicals and plastics player that wants to
reinvent itself by investing the billions of euros it got from
Abbott Laboratories (ABT) in potential high growth markets, like
South America and Asia.
The company, one of Belgium's oldest, will get EUR4.5 billion
cash from its deal with the U.S. drugs company. It looks set to use
much of that on opening up new plants in key regions and by making
acquisitions in the core chemicals and plastics arenas.
"We are building a new refocus for the group," said Chief
Executive Christian Jourquin. He said Solvay intends to focus on
specific regions where the potential for growth is clear, as well
as on products with high added value. The conglomerate said earlier
this year that demand was picking up in Asia, thanks to China, and
in the four Mercosur trading bloc nations - Brazil, Argentina,
Paraguay and Uruguay.
Solvay might have better chances to make acquisitions in
plastics, while developing its own business in chemicals, said
Degroof analyst Bernard Hanssens.
Plastics companies work closely with the clients to develop
specific products, therefore the fastest way to grow would be
through acquisitions.
In chemicals, Solvay has solid potential to expand its own
production in Asia, Hanssens added.
Solvay is likely to be targeting companies which have some
cutting edge technology, in areas such as components for energy
solar panels, and in niche products with high margins and strong
growth potential.
Speculation has already begun over which companies Solvay might
target.
Belgian specialist materials company Umicore SA (UMI.BT) is a
recurring name. It is a specialized, niche chemical maker, it is
strong in Asia, and it has a good return on capital, noted
Hanssens.
Umicore's head of investor relations Geoffroy Raskin had no
comment.
Shares in Umicore gained 3.9% Monday, the day of Solvay's
announcement, making them the best performers in the Bel-20 index
of shares listed in Brussels. ASOlvay's stock meanwhile fell 0.1%,
one of the only two negative stocks Monday.
Solvay's share price performance Monday might have reflected
disappointment over the price the group got for its pharmaceuticals
unit. Some analysts were expecting a somewhat higher price compared
with the overall value of the pharma transaction, which the company
set at around EUR5.2 billion.
Whatever the company wants to do with the money, it needs to act
fast, so that it can already start bidding once it gets the cash
early next year. "Every day you have the cash sitting there, you
lose millions," said Fabian Wenner, an analyst at UBS.
Company Web sites: www.solvay.com/
-By Alessandro Torello, Dow Jones Newswires; +32 2 741 14 88;
alessandro.torello@dowjones.com