SGL to sell Graphite Electrodes to Showa Denko

SGL Group, based in Wiesbaden, Germany, has agreed sell its graphite electrode (GE) business to Showa Denko (SDK) of Japan for €350 million, or at least €200 million after deduction of pension and restructuring liabilities. The two companies will determine the final proceeds based on the balance sheet at closing, which is expected in the first half of 2017, following all approvals.

Following the closing, some 900 employees and six production sites in Germany, Austria, Spain, the US and Malaysia will be transferred to the new owner. Jürgen Köhler, CEO of SGL, said the transaction is an important milestone in the company’s strategic realignment and will allow it to focus its resources fully on its growth areas of Composites - Fibers & Materials (CFM) and Graphite Materials & Systems (GMS), thereby taking advantage of the megatrends mobility, energy supply, and digitization.

Hideo Ichikawa, CEO of Showa Denko, said the deal will allow SDK to pursue the goal of “becoming a truly global leader in the graphite electrode industry by establishing a cost-competitive platform in all three key regions, Europe, the US and Asia, and by producing the highest quality graphite electrode globally.”

SGL said the sale will result in impairment charges of €40-50 million in the current fiscal year, reflecting transaction costs and the continuation of the GE business until the closing date. The cash proceeds equal the book value as of Sept. 30, 2016, the company said. Thus, the transaction will not trigger any write-downs on the book value of the GE business.

To maximize proceeds, SGL plans to pursue a separate sale of its carbon furnace liners and carbon electrodes (CFL/CE) business, which like the graphite electrodes is part of the business unit Performance Products. Here, the sale process will be continued in early 2017. The company said it is confident of achieving more than the book value of the former business unit in the aggregated transactions.

SGL said it is also convinced that the proceeds of the GE sale and the expected proceeds of the CFL/CE sale will contribute to a significant reduction of its net debt position and thereby improve the balance sheet ratio. Additionally, it is evaluating the merits and viability of a potential near-term rights issue leveraging the existing authorized capital framework to further improve the capital structure and restore key financial metrics to create a solid foundation for its growth businesses.