Rag to Take Full Control of Degussa

German mining company RAG, owner of a 50.1% stake in Degussa, will acquire the 43% share in the specialty chemicals company now held by E.ON, effective July 1, 2006. The purchase is expected to cost about $3.4 billion. RAG will then buy out Degussa's remaining minority shareholders.

The deal effectively will bring to an end Degussa's 132 years as an independent company. But that independence has been precarious since RAG first acquired a stake in Degussa in 2002 through a shares swap with E.ON. Although RAG has some chemical operations, there are few overlaps between the two companies' businesses.

For RAG, the deal consolidates a plan to diversify from its original coal-mining business. That diversification will enable RAG—currently owned by a consortium of five investment and energy firms—to be launched on the stock market.

It was partly to fund the E.ON buyout that RAG recently pushed Degussa to seek a buyer for its construction chemicals unit. BASF has already expressed an interest in acquiring this business, which has been priced by financial analysts at roughly $2.4 billion. And rumors are swirling that more of Degussa's businesses, including its fine chemicals unit, are to be sold off as well.

According to Hubertus Schmoldt, chairman of the German chemical trade union IG BCE and vice chairman of the RAG supervisory board, "The intended complete takeover of Degussa is an important marker for further development of RAG to an energy, chemical, and real estate group." He adds, "Integration into the RAG group offers Degussa good future prospects."