DSM Sells Units To Help Shed Chemicals Roots
Dutch chemicals group DSM is selling its fertilizer and melamine units, putting it one step closer to shedding its chemical roots and making new acquisitions.
DSM, which is in the process of becoming a specialist in food supplements and performance materials, said on Tuesday it would sell both units for €310 million to Egypt's Orascom Construction Industries. It would make a book loss of between €15 million to €20 million.
"We had expected a slightly higher price. We were at €425 million," Rabo Securities analyst Fabian Smeets said, but still welcomed the sale because it will allow DSM to move ahead with its strategy.
DSM Chief Executive Feike Sijbesma has said the company would complete its divestments before making any large acquisitions. Asked on a conference call whether DSM was looking at potential partners, Sijbesma said that it still too early to say. DSM shares were up 0.1% at €32.86 in early trade, slightly underperforming the main index which was up 0.7%. The shares have more than doubled from five-year lows in 2008, but are down 6% from a 12-month peak of €35.25 set in January.
The two businesses going to Orascom make up about 40% of the sales of the Base Chemicals and Materials business slated for divestment by the end of 2010. The businesses had been for sale for over two years.
Chief Financial Officer Rolf-Dieter Schwalb said that although the group would try to sell the other activities before the end of 2010 he was not in a hurry.
"We will not give the businesses away just because we want to sell in 2010," Schwalb said adding that there was no pressure on DSM's balance sheet to sell. The sale, which is expected to close in the second quarter, will be on a cash and debt-free basis with effect from Jan. 1, 2010.
The sell of the agro and melamine businesses will slightly boost the profitability of DSM's Base Chemicals and Materials unit. DSM Agro produces ammonia and high-nitrogen fertilisers for grasslands and agricultural crops and had net sales of €338 million in 2009. DSM Melamine is the world's largest producer of melamine and realised net sales of €151 million in 2009.
