Evonik and Clariant: How much truth is in this rumour?

The first action was to pick up the phone and talk to both companies about the rumour. With no big surprise I only received the following answer by Evonik and Clariant: “We do not comment market rumours!”

What arguments are there for an acquisition?

Speculations tax the worth of Clariant at EUR 7 billion. The deal would make Evonik a EUR 20 billion company, leaving many competitors behind. A purchase would strengthen Evonik’s regional presence in certain markets as Clariant has a strong foothold in South America and Asia. And, it’s not the first time that Clariant is rumoured to be a target for an acquisition. Christoph Schöndubbe, analyst at Independent Research, said on the website of RP Online that there are some arguments in favour of an acquisition. “Evonik is seeking to strengthen its segment Consumer, Health & Nutrition, and Clariant is strong in this segment as well. This will bring synergies to the table and makes the speculated purchase price realistic”, says the analyst. According to him, it is now the time for a mega deal as the company has to grow to remain competitive on a global base.

What arguments are there against an acquisition?

The acquisition only makes sense if there are synergies. The potential synergies are apparently not that high and the amount product overlaps is manageable. According to industry insiders there is only an overlap of approx. 30 %, and mainly in the cosmetics segment. By adding pigments and masterbatches Evonik could achieve a broader portfolio, but it also takes on businesses where the company has only little experience in. Especially the missing synergy could potentially have a negative impact on the jobs of many employees. We remember when BASF bought Ciba: a couple of months later thousands of jobs were cut worldwide.

How realistic is an acquisition?

A couple of days after the rumour was out Clariant CEO Hariolf Kottmann told Switzerland's Handelszeitung: “I've read everywhere that we're on the shopping list of many companies. But I would be very surprised and also bitterly disappointed if a competitor actually did launch a hostile offer. The entire industry knows that we don't want to be acquired.” I think this attitude by the management doesn’t make an acquisition impossible, but harder.

What’s your opinion?