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Mergers & Acquisitions

EU forces Celanese to abandon acetate joint venture, approves Bayer-Monsanto deal, with conditions

Chemical tie-ups feel the heat from EU regulators

by Alex Scott
March 26, 2018 | A version of this story appeared in Volume 96, Issue 13


An illustration of a cigarette being put out on two company logos.
Credit: C&EN/Shutterstock

Celanese and the private equity firm Blackstone have abandoned plans to merge their cellulose acetate businesses after they were unable to agree to terms with European antitrust authorities. The companies had announced plans to merge the businesses, which produce material for cigarette filters, in June 2017.

Blackstone owns the former Rhodia acetate business, having bought it from Solvay in 2017 for $1.1 billion. Celanese, which runs a similar business, was set to own 70% of the combination, which would have had annual sales of about $1.3 billion and 2,400 employees.

Celanese complains that regulators required excessive divestitures that would have eliminated the benefits of the transaction. “We worked hard and offered serious remedies to the European Commission and believed we had solved all competition issues identified,” CEO Mark Rohr says.

Approval, without any divestitures, was granted in Mexico, Turkey, China, and Russia, Celanese says. Rohr plans to have a new strategy for the business in place in time for an investor event on May 1.

Meanwhile, the EC has approved Bayer’s acquisition of Monsanto on the condition that Bayer sell more than $7 billion worth of businesses in areas including field crop seeds, vegetable seeds, glufosinate herbicides, and digital farming tools. Bayer says it has agreed to sell these businesses to BASF.

The deal has yet to gain approval from the U.S. Department of Justice. Nevertheless, Bayer says it is now on track to complete the acquisition in the second quarter. Bayer first agreed to buy Monsanto for $66 billion in September 2016.

The Celanese-Blackstone and Bayer-Monsanto deals are two of four proposed chemical tie-ups that have been undergoing in-depth EC antitrust investigation. The others are the merger of Linde and Praxair and Tronox’s planned acquisition of Cristal. Only two other deals—one in steel, the other in eyewear—are currently subject to such scrutiny in Europe.

Kevin McCarthy, a stock analyst at Vertical Research Partners, asserts that the Celanese-Blackstone deal collapsed because the EC is taking a “harder line” on cross-border M&A. “We are not terribly surprised by the outcome, as we had viewed antitrust risk in Europe as a formidable deal risk from day one,” he wrote in a note to clients.

But Paul Hodges, head of U.K. consulting firm International eChem, argues that the deal fell apart because it was motivated by low interest rates and short-term gain rather than long-term business strategy. “With short-term benefits reduced by the regulator, the deal had no rationale,” Hodges says. “Rather than the EU getting tougher, the current spate of anti-trust investigations simply reflects a spike in the number of mega deals the chemical industry has been arranging to take advantage of cheap money.”


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