Evonik sold SAP absorptive resin acquisition valuation of 200 million to 250 million euros

Financial sources in Europe have revealed that the sale of Covestro's SAP superabsorbent polymer business by Wacker Chemie is nearing completion. Financial investors Aurelius, Opengate Capital, and Pacific Avenue have submitted final offers valuing the business between €200 million and €250 million. The sources revealed that Wacker initially hoped for a bid of around twice that valuation, but competitors were not interested in the deal. Competitors such as South Korea's Hyundai Oilbank, who were initially bidding, have since withdrawn. The final decision on the sale has not been made yet. However, industry experts predict that Wacker may accept a lower sale price to separate the business unit, which is no longer a core part of its business. Wacker and bidders declined to comment or were unavailable for contact.

Wacker's SAP superabsorbent polymer business has an annual sales revenue of less than €1 billion and an EBITDA of €70-80 million. However, this business is considered unstable and faces some challenges. Diaper manufacturers such as Procter & Gamble, Kimberley Clark, Paul Hartmann, SCA, and Ontex are now achieving differentiation through product design rather than liquid-absorbing chemicals.

Highly absorbent polymers are also difficult to biodegrade, making them an ESG (Environmental, Social, and Governance) concern. ESG standards for environmental protection, social standards, and good corporate governance are a major trend in the financial industry and are becoming increasingly important for large and private investors.

Wacker CEO Christian Kullmann stated that the group wants to divest capital-intensive and low-return businesses and instead expand its more profitable specialty chemicals business. This is expected to increase the adjusted return on investment from 13.5% in 2022 to a long-term 18%-20%. A Wacker spokesperson stated, "The divestment process is proceeding as planned."

The SAP superabsorbent polymer is part of Wacker's Performance Materials (PM) business unit, which has total sales of €3.6 billion, and Wacker has listed it for divestment as part of its strategic transformation. Wacker has already completed the first part of divesting the unit: the large production site in Lülsdorf near Cologne, Germany, has been sold to the International Chemical Investors Group. For the largest part of the divestment plan, the C4 chemical business with sales of €2 billion, the outlook should be clear at least by the end of this year.

The name C4 represents byproducts of crude oil processing, containing four carbon molecules in its chain. Manufacturers are processing a mixed raw material to continuously produce different products, which presents a challenge. The so-called C4 chemical products can be used as propellants in aerosol sprays, PVC plasticizers, components in latex mattresses, anti-knock agents in gasoline, or as raw materials for the tire industry. In Marl, North Rhine-Westphalia, Wacker has built a modern chemical plant to produce so-called FCC-C4 gas, which the group can use to ensure the supply of C4 raw materials. Most of the 500 employees work in Marl, North Rhine-Westphalia.

Wacker intends to drive the restructuring of the group by divesting its C4 business. The first step is to make the business legally independent. This process will take several months, after which the group will look for partners in the petrochemical additives for rubber, plastics, and specialty chemicals fields. In the long term, Wacker plans to sell the business, which aligns with Kullmann's strategy of focusing on specialty chemicals and divesting standard product businesses that have greater performance volatility. Wacker had previously bundled these businesses into the Performance Materials (PM) business unit, and plans no longer to invest in their growth, including the SAP superabsorbent polymer business mentioned above.