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Business

Degussa Readies A Streamlining

Company to reorganize top management, weighs sale of construction chemicals

by Patricia Short
December 19, 2005 | APPEARED IN VOLUME 83, ISSUE 51

For Sale?
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Credit: Degussa Photo
Degussa opened this construction chemicals competence center in Trostberg, Germany, in 2002.
8351notw2degussa.jpg
Credit: Degussa Photo
Degussa opened this construction chemicals competence center in Trostberg, Germany, in 2002.

Specialties

As predicted in a leaked report of a reorganization plan prepared by Boston Consulting Group (C&EN, Dec. 12, page 11), Degussa will strengthen its management structure and streamline its businesses.

Effective Jan. 1, 2006, the company's management board will be expanded from four to six members. At the same time, its existing five divisions will be eliminated as a management layer. Instead, a trimmed number of business units that now make up the divisions will report directly to the management board.

The 17 business units, down from 20 today, will be distributed into four segments for financial reporting: technology specialties, construction chemicals, consumer solutions, and specialty materials.

How long those segments will remain, however, is not clear.

Degussa's majority shareholder, RAG, has discussed with employee councils the possibility of financing a buyout of minority shareholder E.ON by selling off some of Degussa's businesses. In what may be a reaction to that threat, Degussa says it is weighing the sale of its construction chemicals operations. Such a sale would remove annual revenues of roughly $2.2 billion, 14% of the company's total, and 13% of operating profits.

On the other hand, the company's fine chemicals operations, although plagued by industrywide overcapacity, seem set to remain.

Potential purchasers of Degussa operations are already circling. For example, private equity firms Advent Venture Partners and Blackstone Group are reportedly interested buyers.

Hubertus Schmoldt, chairman of the German Mining, Chemical & Energy Industrial Union (IG BCE) and vice chairman of RAG's supervisory board, and Werner Bischoff, a member of IG BCE's main board and Degussa's supervisory board, said in a joint statement late last month that the RAG and Degussa boards "have currently no concrete knowledge of any plans of a sell-off."

They added, however, that "if the necessity for change arises for Degussa, then we will work with the process and will be co-decisionmakers."

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