Lanxess and DSM to Merge Plastics under Private Equity?

01.02.2022 - Lanxess and private equity investor Advent International are reportedly discussing a transaction that could see the German company’s engineering plastics portfolios merge with the polymer-related activities being flogged off by DSM in the Netherlands. The resulting new entity would likely be controlled by Advent.

None of the players named by sources speaking to the German Handelsblatt newspaper has confirmed the purported deal that, as the paper noted, could create a powerful new supplier of engineering plastics with a portfolio worth €3 billion. The new company would cater to the European automotive industry as it steers toward electro-mobility.

During 2021, both companies – DSM in September and Lanxess in November – announced plans to carve out their respective engineering plastics activities and review prospects for them, with neither ruling out a divestment.

The combined bulk of the new player’s activities would consist of PA 6.6, which according to analyst estimates could have annual output capability of more than 500,000 t. Beyond PA, the German company also produces PBT, while its Dutch rival additionally has a small range of other PA specialties.

DSM has been streamlining its resins-related businesses for more than half a decade. In 2015, it hived off the majority of its caprolactam and acrylonitrile intermediates activities and its composite resins portfolio to private equity investor CVC Capital Partners. In October 2020, the company sold its resins & functional materials unit to Germany’s Covestro, the former Bayer MaterialScience, for €1.6 billion.

It is unclear how the merger of the German and Dutch businesses would affect DuPont’s plans to divest its own PA 6.6 portfolio, along with its PBT and POM franchises, a proposal it floated in early November last year. In 2003, the US player, inventor of polyamide, which it gave the now famous name of Nylon, sold more than of half of its PA 6.6 assets to the US-based Koch group. The buyer then started a new company, which trades as Invista.

The bulk of the portfolio that stayed with DuPont is manufactured in Europe. As both the Lanxess and DSM production facilities are also concentrated in Europe, the EU Commission would surely take a sharp look at competition-related issues as it did in the mammoth PA deal between Solvay and BASF first proposed in 2017. The asset transfer was concluded at the end of 2019 following an in-depth review.

Author: Dede Williams, Freelance Journalist