Arkema is offloading its loss-making vinyl division to Switzerland's Klesch Group, as it refocuses on products that are less sensitive to volatility in raw material prices and the economic cycle.
The transfer of the division, which has suffered from a downturn in the European construction market, should lead to exceptional net expenses of around €470 million ($634 million) in 2011, including a cash charge of about €100 million for Arkema, the company said in a statement.
"It's before the large cyclical reversal everyone was waiting for, so even if they pay 100 million euros to get rid of it, it's not the end of the world," Societe Generale analyst Patrick Lambert said.
He added that the market now no longer had any reason to apply a discount on the shares based on the cyclical nature and negative impact of the vinyl business.
Klesch is an investment group active in the oil, gas, transportation, electricity and aluminum industries.
Arkema said the project would not entail any restructuring of the manufacturing plants involved, while 1,780 employees in France and 850 outside the country would be transferred to the new entity, headquartered in Lyon.
Arkema's Vinyl division generated 19% of group sales in 2010 against 25% in 2005. Sales reached €1.1 billion and have remained little changed since 2008.
The division made a loss before interest, tax, depreciation and amortization of €14 million in 2010, after a €31 million loss in 2009.
"This divestment of the loss-making vinyl division is a strategic good move for Arkema," a Paris-based trader said, adding that it would give the company a much more attractive profile and leave it with a still healthy balance sheet.
Vinyl products end up in pipes, packaging, cables, wires, pulp and paper. Vinyl is one of Arkema's three business segments, alongside industrial chemicals and performance products.
