Private Equity News & Analysis

Old friends in joint bid for DMC2

Cinven and Investcorp, which jointly bought Avecia last year, are one of two parties left in the auction for the German precious metals group. The competition are two US trade buyers, also bidding as a team.

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There are two groups left in the running for the precious metals and catalysts business of German chemicals group Degussa-Huls, according to reports.

Private equity firms Cinven and Investcorp are jointly bidding for the Degussa Metals Catalysts Cerdec (DMC2), whilst a US consortium made up of OMG Group and Ferro Corp, two Cleveland-based speciality chemicals companies, also remains in contention. Both bidders are thought to have completed due diligence.

The division is valued at about E1.6bn. DMC2 owes banks about E600m and has metals trading liabilities worth E500m, according to the newspaper. Cinven and Investcorp are believed to have submitted a bid in the region of E1.2bn. The private equity houses have invested alongside each other before. Last year they paid £1.3bn to buy Avecia, the speciality chemicals division of AstraZeneca.

Degussa is still reserving the option to float DMC2, though this is considered unlikely. Degussa said last year it planned to dispose off the independent subsidiary, which produces materials used in communications, electronics and sensor technology.

Goldman Sachs and German private bank Metzler are advising Degussa on the sale.

Today Degussa announced better than expected results. It said sales grew by 21 per cent to E16.9bn (without precious metal trading). EBITA (earnings before interest, taxes and amortization of goodwill) increased by 31 per cent to E1.201bn. Operating profit after interest rose 58 per cent to E672m. Last summer DMC had said it expected sales to rise 18 per cent this year and at an average of 14 per cent over the next few years.