State-owned ChemChina in talks to buy Germany’s SGL Carbon

State-owned China National Chemical Corporation (ChemChina) is in talks to buy German graphite electrode and carbon fibre maker SGL Carbon, German language Manager Magazin yesterday reported, citing company sources.

ChemChina chairman Aye Ren Jianxin, has already held several round of talks with SGL Carbon CEO Juergen Koehler and its major shareholder Susanne Klatten, the report said.

Susanne Klatten, great grand-daughter of Gunther Quandt, founder of BMW and Germany's richest woman, is the biggest shareholder in SGL Carbon with about 28 per cent stake followed by German luxury carmakers BMW with 18.4 per cent and VW with 9.98 per cent, while 37 per cent is free float.

SGL Carbon had planned to spin off its struggling carbon electrodes business by end June because of low demand for steel. This unit is a major supplier to the steel sector.

The Wiesbaden-based company had also sent out information packages on its graphite electrodes business to potential investors, the report said.

ChemChina is keen on buying all of SGL Carbon but is open to other options, the report added.

Formed in 1992 through a merger between SIGRI GmbH of Germany and US-based Great Lakes Carbon, SGL Carbon is one of the world's leading manufacturers of products from carbon having a portfolio that ranges from carbon and graphite materials to carbon fibers and composites.

SGL is the only European company that makes carbon fibres that are used in making ultra-lightweight but very durable carbon reinforced plastics like those used in the BMW i3 electric car and i8 plug-in hybrid.

Carbon reinforced plastics made by carbon fibres are critical to automakers that make large, powerful cars since it helps to reduce the CO2 produced by these vehicles.

SGL Carbon and BMW have two joint ventures, one for producing carbon fibres at a factory in Washington, and their second joint venture facility in Germany converts those fibers into fabrics.

The company has 38 production sites around the globe, a service network in over 100 countries and employs 5,249 people.

With a market cap of just over €1 billion ($1.12 billion), SGL Carbon posted net income of €131 million in 2015 on revenues of €1.373 billion.

Beijing-based ChemChina was created in 2005 by putting together several chemical firms under China's erstwhile ministry of chemical industry and grew into a $36.5-billion business with 140,000 employees under chief executive Aye Ren Jianxin, a former communist youth league leader.

The company's main businesses include materials science, life science, high-end manufacturing and basic chemicals, among others.

The company has invested more than $15 billion in overseas deals in the past decade and its recent overseas acquisitions include Italian tyre maker Pirelli & C. SpA, German machinery maker KraussMaffei Groupa, and a 12 per cent of Swiss commodity trader Mercuria Energy Group.

Its earlier purchases include Adisseo Group of France, Australia's Qenos Holdings and Norway's Elkem.

In February, it struck a friendly $43-billion deal with Swiss seeds and pesticides giant Syngenta AG to become the world's biggest supplier of pesticides and agrochemicals. (See: ChemChina to acquire Syngenta in $43-bn friendly deal)

This deal is currently being reviewed by regulators around the world.