Henkel to sell Cognis to Schroder Ventures?

Schroder Ventures looks set to buy Cognis, the speciality chemicals company that forms part of Henkel, the 125 year old German household products group. The deal would represent a landmark in the chemicals sector, being one of the largest LBOs ever. The previous mega-deal in the sector was when Cinven and Investcorp bought Astra Zeneca’s Avecia for $2.1bn in 1999.

The German conglomerate mandated Merrill Lynch to handle the sale as part of its strategic review. The company is keen to focus on its consumer brands and felt that a sale of the speciality chemicals operation – which contributes some 25 per cent of revenues – was a necessary step to achieve a re-rating of Henkel and its shares.

The deal is also further evidence of how major German companies are adopting a more pragmatic and focussed approach to their strategic and operational development.

Schroder Ventures is not the only private equity firm interested in the sale: Advent International, CVC Capital Partners and Kohlberg Kravis Roberts have also expressed interest. Private equity firms have been attracted to the speciality chemicals sector by the opportunity to precipitate consolidation in a sector that is less cyclical and offers better margins than the bulk chemicals sector.

Analysts suggest that Cognis could be worth as much as E2.5bn which would represent a 6.5 EBITDA multiple. The firm is being advised by Goldman Sachs. Although an announcement is expected later this month, the Financial Times reports that the exact terms of the acquisition have yet to be finalised.