Lanxess Wants Degussa

Putting an end to weeks of rumors, German chemical company Lanxess confirmed last week that it wants to acquire compatriot firm Degussa.

In a conference call discussing Lanxess' first-quarter results, Lanxess Chairman Axel C. Heitmann argued that his company has improved enough since it was spun off by Bayer in January 2005 that "we are now in a position to grow through acquisitions." A good purchase among several options, he added, is Degussa.

"The two companies are an ideal fit and have few overlaps," he said. "Combining them would create a new, strong, global player. We stand by that, and we're willing to go down that road."

Lanxess had 2006 sales of $8.7 billion; Degussa's sales were $13.7 billion. In interviews with German newspapers, Heitmann argued that Degussa is worth between $10 billion and $13 billion. Factoring in Degussa's pensions and debt, that would justify an acquisition price tag of anywhere from $5 billion to $8 billion, he said.

Degussa is owned by the German conglomerate RAG and is tangled up in RAG's plan to transfer its coal business and related pension obligations to a private foundation that will be funded by money from a RAG stock offering set for next year. Heitmann contends that selling Degussa instead would have no impact on the controversial coal plan and thus should be considered on its own merit.