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Business

Financial Firms Buy H. C. Starck

Sale of metals maker will help Bayer's life sciences push

by Marc S. Reisch
December 4, 2006 | A version of this story appeared in Volume 84, Issue 49

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Credit: Bayer
H. C. Starck scientist examines solid-oxide fuel-cell components.
Credit: Bayer
H. C. Starck scientist examines solid-oxide fuel-cell components.

Bayer plans to sell its H. C. Starck subsidiary for $1.6 billion to U.S.-based financial investors Advent International and the Carlyle Group. The German firm will use the proceeds to advance its life sciences strategy and help finance the $22 billion purchase of pharmaceutical maker Schering.

The sale will close at the beginning of 2007, pending regulatory approvals. Bayer will pocket about $920 million; the remainder will cover debt and pension liabilities. Still pending is the sale of cellulosics maker Wolff Walsrode, which Bayer also put on the block to fund the Schering purchase.

The buyers made the winning bid in an auction that included both financial and corporate investors. According to press reports, bidders in the final round included Bain Capital and Belgian metals maker Umicore.

Starck, headquartered in Goslar, Germany, manufactures metal and ceramic powders and parts. It also produces specialty chemicals, including electrically conductive polymers. The firm employs 3,400 people and had global sales last year of $1.2 billion.

Although Starck's sales last year were up 31% from 2004, some analysts suggest that the purchase price was lower than it could have been because of a decline in profitability at the unit in recent years. Heinz HeumÜller, Starck's managing director, says Starck will "work to further improve performance."

The investment firms say they will support the expansion of Starck's business, but they also say their game plan is to sell the company in an initial public offering within the next three to five years.

The winning bid shows that financial buyers maintain a keen interest in chemical assets, even though they have been more cautious in 2006 than last year. According to Peter Young, president of investment banking firm Young & Partners, financial buyers completed 11 major transactions involving chemical businesses in the first nine months of 2006. In the same period in 2005, they completed 20 deals.

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