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Race for DSM Engineering Plastics Heats up

10.05.2022 - The race to take over DSM’s engineering plastics business is heating up. After Lanxess in cooperation with private equity group Advent International was identified as a potential buyer early this year, Austrian energy group OMV has confirmed it will participate in the second bidding round.

According to sources speaking to Bloomberg News, US industrial conglomerate Koch Industries is also expected to join the second bidding round, and private equity investor SK Capital may also have tossed its hat into the ring, When the news of a sale first emerged last year. Analysts estimated that the DSM plastics activities could fetch more than €3 billion.

Parallel to exiting materials, DSM plans to sharpen its focus on life science, regrouping its operations into three new business areas consisting of food and beverage; health, nutrition and care; and animal nutrition and health.

In April, the Dutch group agreed to sell its protective materials business, which primarily includes its Dyneema fiber brand, to US specialty polymer materials maker Avient for an enterprise value of $1.485 billion. This deal is expected to close in the second half of 2022.

Nearly a decade ago, in 2015, DSM sold off the majority of its caprolactam and acrylonitrile intermediates activities along with its composite resins portfolio to private equity investor CVC Capital Partners. In October 2020 it sold its resins & functional materials unit to Germany’s Covestro for €1.6 billion.

While OMV said it was keen to expand beyond polyolefins and add a more specialty-oriented business, how committed it is to a deal with DSM is unclear. In its statement, the group acknowledged that its supervisory board has not taken up the matter. Koch, which owns the nylon franchise it bought from the material’s inventor DuPont some years ago and also produces polyester and its precursor PTA, has not commented on the mooted plans.

All of the bidders mentioned would have sufficient funds to stem such a deal. Market watchers see the Lanxess angle as affording the most synergies with the activities up for grabs and more attractive from a resale perspective.

The bulk of a potential ink-up of the Dutch and the German player’s portfolios would consist of PA 6.6. According to analyst estimates, it 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.

Lanxess is also in the process of reorganizing it plastics activities with an eye to shedding them. By some accounts, a plastics company with more critical mass, incorporating the DSM unit, could fetch an attractive price. DuPont’s PA business is also up for sale.

All of the bidders mentioned would have sufficient funds to stem such a deal. Market watchers see the Lanxess angle as affording the most synergies with the activities up for grabs and more attractive from a resale perspective.

The bulk of a potential ink-up of the Dutch and the German player’s portfolios would consist of PA 6.6. According to analyst estimates, it 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.

Lanxess is also in the process of reorganizing it plastics activities with an eye to shedding them. By some accounts, a plastics company with more critical mass, incorporating the DSM unit, could fetch an attractive price. DuPont’s PA business is also up for sale.

Author: Dede Williams, Freelance Journalist

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