Evonik Edges Closer To IPO

Because of better than expected profits for 2007, Evonik Industries in Essen, Germany, appears to be speeding up plans to sell shares to investors through an initial public offering (IPO).

Evonik, which incorporates the former Degussa in a diverse portfolio, says results "far exceeded expectations" for the first year under its new name. According to Chairman Werner Müller, Evonik "is fit for the capital markets." Preliminary results for 2007 showed a 2% sales increase to $19.7 billion, and pretax earnings were up 14% to $1.8 billion.

Evonik is owned by the RAG Foundation, which was formed in 2007 to manage the exit of RAG Corp. from the coal mining business by 2018. To do so, the foundation has to sell off Evonik in order to fund its pension obligations, which are expected to extend well beyond 2018. M??ller says Evonik's financial results are encouraging enough that the company wants to push ahead with its plans for an IPO. The foundation had wanted to launch an IPO in the first half of this year, but sluggish market conditions persuaded managers to postpone a public sale.

RAG is considering placing the first batch of shares with a third-party investor, M??ller says. "The foundation supports this because it would make Evonik more attractive" prior to an IPO, he says. He adds that the company would only place shares with an investor "at a far higher price than could be obtained" if the foundation were to sell a first batch of shares directly through an IPO.

Evonik's current status as a wholly owned subsidiary of the foundation reflects what has long been a complex and occasionally messy ownership structure. The foundation consists of Evonik???international chemicals, energy, and real estate businesses???and a mining group that mines hard coal in Germany under government contract.