May 26, 2008

Volume 86, Number 21

p. 10

European Specialties

Evonik Closer to Going Public

A third-party investor may have first crack at buying shares

Patricia Short

BECAUSE OF BETTER than expected profits for 2007, Germany's Evonik Industries appears to be speeding up plans to sell shares to investors through an initial public offering (IPO).

Evonik, which includes the former specialty chemical maker Degussa and other businesses, says results "far exceeded expectations" for the first year under its new name. According to Chairman Werner Müller, Evonik "is fit for the capital markets." Preliminary results for 2007 showed a 2% increase in sales to $19.7 billion and a 14% increase in pretax earnings to $1.8 billion.

Evonik is owned by the RAG Foundation, which was formed in 2007 to manage the exit of RAG Corp. from the coal-mining business by 2018. To do so, the foundation has to sell off Evonik in order to fund its pension obligations.

Müller says Evonik's financial results are encouraging enough that the company wants to push ahead with its plans for an IPO. The foundation had wanted to launch an IPO in the first half of this year, but sluggish market conditions persuaded managers to postpone it.

According to the quarterly IPO Sentiment Indicator compiled by the German stock exchange, however, prospects are still gloomy for IPOs. In March, the IPO sentiment hit the lowest level since introduction of the survey in 2005, and it does not appear to have improved markedly in the past two months.

That IPO outlook might explain why the RAG Foundation is considering placing the first batch of shares with a third-party investor. Five private-equity investors are in the running to buy them: Blackstone, Bain Capital, CVC Capital Partners, and a partnership of investor Kohlberg Kravis Roberts and private bank Sal. Oppenheim.

The foundation is not obligated to retain a stake in Evonik but says it plans to hold about 25% of the company on a long-term basis.

Chemical & Engineering News

ISSN 0009-2347

Copyright © 2008 American Chemical Society