29 Mar 2011 02:48 PM
Frankfurt- BASF SE (BAS) is in talks to sell its nitrogen-fertilizer unit to companies including Orascom Construction Industries (OCIC), said two people with knowledge of the situation.
Discussions with Orascom are at a preliminary stage, said the people, who declined to be identified because the process is private. The assets include a nitrogen site in Antwerp, Belgium, and a share of a venture in France, which together generate about 500 million euros ($702 million) in sales.
A disposal would mark the first time BASF, the world’s biggest chemicals company, has outright offered a part of one of its six fully integrated chemical complexes to an outside investor. The deal may prove more attractive to a strategic investor who can gain more value over a long period, said Mutlu Gundogan, an analyst at Royal Bank of Scotland.
“There are synergies that a strategic buyer can extract,” said Gundogan, who recommends investors buy BASF shares. “The market needs to consolidate.”
BASF spokeswoman Jennifer Moore-Braun and Orascom’s Omar Darwazah declined to comment on the sale. Competing suitors may include Yara International ASA (YAR) and EuroChem.
Yara, the largest publicly traded nitrogen-fertilizer maker, may be interested in the operations at the right price, spokesman Asle Skredderberget said March 10. Vladimir Torin, spokesman for EuroChem in Moscow, declined to comment.
The German company said March 1 that it planned to sell the bulk of its fertilizer operations. The move highlights BASF’s steps to shift focus away from cyclical products. BASF will retain the fertilizer assets in Ludwigshafen, where the company has its headquarters.Higher Prices
A deal with BASF would follow Orascom’s purchase of similar fertilizer units from Royal DSM NV for 310 million euros a year ago. Higher fertilizer prices, stemming from a recovery in agricultural markets, helped boost the Egyptian company’s profit by 76 percent in the most recent quarter.
Orascom Chief Executive Officer Nassef Sawiris on March 8 predicted prices will remain “healthy” in 2011 due to improved prices for corn and wheat.
“They are building up a fertilizer division,” said Gundogan. “They made the first step with DSM, which gives them a foothold. Orascom is close to cheap feedstock. But the consumers are in Europe.”
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