Yesterday, the RAG Foundation, a German public-sector trust, said it would reduce its 68% share in the animal feed additives and polymer producer over the medium term, in a bid to diversify its investment risks.
The trust issued a €600 million bond this week which can be swapped for shares in Evonik - saying it increased the offer by €200m following huge interest.
"The strong demand demonstrates the high attractiveness of the Evonik share for investors in the capital market,” said Dr Werner Müller, head of the trust.
He said RAG would be careful not to depress Evonik's share price when cutting its stake in the German chemical maker.
Alongside the foundation, private equity firm CVC has an 18% stake in the German company.
Takeover target
Markus Mayer, an analyst at KeplerCheuvreux, told us the ‘back door’ move by the RAG foundation is aimed at avoiding the risk of share overhang and is ‘good news’ for Evonik.
“It will bring more liquidity into trading volume and result in a broader share base with the potential to make Evonik a takeover target in the long run.
Evonik is a large animal but most of the chemical giants would be interested in the biotechnology side of its business, which has massive growth potential. The amino acids segment is heavily commoditized and would not be attractive to potential buyers,” said the analyst.
While the specialty materials segment of the Essen-heaquartered firm would also be appealing to any chemical behemoth on the acquisition trail, Mayer said Evonik’s expertise in the use of microorganisms for biocatalytic and fermentative production processes would be the real draw.
Stable amino acid prices
Evonik, which has been hit by weak currencies in some emerging markets, said, in its first quarter results last month, that it expects prices to stay at least stable in large areas of its portfolio – including amino acids for animal nutrition.
New amino acid production plants in Russia and Brazil are expected to be operational very soon.
For the three months to March, the German firm recorded a dip in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) to €463m from €606m a year ago on 1% higher organic sales of €3.2 bn.
Feed investments
Meanwhile, Evonik also said last month that it may cut its €6 bn ($8.3 bn) investment program by up to 15%. It was launched in 2012.
April saw the German firm announce its backing, as part of an investors’ consortium, of the development of a microalgae derived beta-glucan by US firm Algae Scientific. The product is said to support immune health for animals and could help the sector migrate away from over usage of antibiotics.
March also saw the company announce the development of a new feed amino acid, Aquavi Met-Met for the shrimp sector.
The product, a dipeptide comprising two methionine molecules, has been designed to help shrimp feed formulators meet the optimal dietary methionine levels, which are typically low in vegetable based diets.
The manufacturing facility for Aquavi Met-Met will be next door to Evonik's DL-methionine production sites in Antwerp, and production is set to commence next year.