June 20, 2011 - IMM@BUCT

LEADER Kottmann (center) wasoptimistic in discussions withanalysts and the media.on growth. The company completedfour acquisitions in thefirst half of this year. Three dealswere small “bolt-on” purchasesthat boosted existing businesses.The fourth deal is the $2.1 billionpurchase of Süd-Chemie , a specialtiesplayer based in Munich.Kottmann calls the purchase a“strategic transformation project.”Kottmann was particularly eager to expoundon the opportunities presented bythis acquisition, since the financial marketshave not responded as he had hoped. Thecompany shocked analysts when it announcedthe deal at its annual results conferencein February (C&EN, Feb. 21, page10), and it continues to work to get the messageout about the value and fit of the firm.“Clariant did not communicate thatthey were looking for acquisitions,”Markus Mayer, research analyst at investmentgroup UniCredit, told C&EN, “and90% of investors criticized managementfor this poor communication. But after thatfirst shock, investors have realized that thisis a good deal.”The company’s stock price reflected thesurprise, dropping 18% soon after the dealwas announced and only slowly recoveringthrough the spring to return to the healthylevels seen at the end of 2010.THE SÜD-CHEMIE acquisition adds twonew business units to Clariant’s portfolio—one in catalysts and energy and one in functionalmaterials—and boosts company revenuesby 14% over 2010 results. Kottmannhighlighted that both of these units havehigher growth rates and earnings marginsthan the company’s existing businesses.The catalysts and energy unit includescatalysts for petrochemical, chemical, andpolyolefin production and for refinery,air purification, and fuel-cell operations.Additionally, Süd-Chemie’s emerging businessin battery materials is a part of thisgroup. The unit’s sales totaled $730 millionin 2010.The functional materials unit combinesSüd-Chemie’s businesses in adsorbents,packaging, and water treatment. Last year’ssales for these businesses were $745 million.A foundry products division is in aseparate joint venture with Ashland.The overlap with the existing 10 businessesat Clariant is minimal, which shouldease the integration process, noted Clariantexecutive committee member MathiasLütgendorf. The integration of Süd-Chemiestarted last month, and he expects thatit will be complete by year-end.INTEGRATION MAY WELL be smooth becausethe two companies are similar, withmostly German managers who were previouslyemployed with the historic top threecompanies from Germany: Hoechst, BASF,and Bayer. Clariant seems to have a morecasual working environment with informalgreetings and fewer titles used than at Süd-Chemie, but such differences are small andshould be easily managed. The real challengewill be retaining the technical expertisethat has been critical to the strength ofSüd-Chemie.Süd-Chemie will not be subject to theplant restructuring activities done at Clariant,but CFO Jany is counting on cost synergiesfrom the overlap of support services.He estimated savings of $36 million fromcombining headquarters and eliminatingduplicate regional offices, and an additional$70 million to $100 million in annualcost reductions resulting from efficienciesgained by adopting Clariant businesspractices.But Kottmann emphasized that thedeal is not only about cost savings. “It is aunique opportunity to shift the portfolio”to new technologies, he said, noting particularlylithium batteries, clean air products,and biocatalysis. He was especially excitedthat Süd-Chemie has expertise in producingrenewable raw materials, since Clariantcustomers have been requesting theseproducts. Süd-Chemie is building a cellulosicethanol unit using its enzyme-basedSunliquid process. The plant will start up inGermany later this year.Clariant has set ambitious targets forthe next few years, forecasting sales of$11.6 billion and an earnings margin above17% by 2015, compared with its 2011 estimateof near 14%.Hans-Joachim Müller, a Süd-Chemiemanaging board member, was the onlyrepresentative of the acquired firm at theevent, suggesting that he will have an activerole at the combined company. As Kottmanndiscussed future financial targets andgrowth opportunities, he often looked inthe direction of Müller, seated in the frontrow. 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