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December 22, 2003
Volume 81, Number 51
CENEAR 81 51 p. 9
ISSN 0009-2347


ACQUISITION

CELANESE TO GO PRIVATE
Lukewarm reception greets Blackstone's $3.8 billion bid

ALEX TULLO

Celanese is one of the oldest and most recognizable names in the chemical industry. It has been a U.S. company, a subsidiary of Hoechst, and, for the past four years, an independent, publicly traded German firm. But a $3.8 billion offer from New York City investment fund Blackstone Group may take the company private.

CELANESE AT A GLANCE
Headquarters: Kronberg, Germany
Sales: $4.1 billion
Earnings: $177 million
Employees: 10,700
MAJOR BUSINESSES (% OF TOTAL SALES):
Acetyl products(43%)--acetic acid, polyols, vinyl acetate, and derivatives
Chemical intermediates (19%)--acrylic acid, oxo products, and acrylates
Acetate products (16%)--cellulose acetate filament and filter tow
Ticona technical polymers (18%)--liquid-crystal
polymers, polyacetals, and polybutylene terephthalate
Performance products (4%)--acesulfame-K sweetener, sorbates, omega-3 fatty acids
Website: http://www.celanese.com
NOTE: Figures are for 2002.
SOURCE: Celanese
Blackstone is offering the equivalent of $40 per share for the company. That price is above Celanese's all-time-high closing price, more than twice the price of Celanese's shares when it was spun off from Hoechst in 1999, and 13% above Celanese's average closing share price over the past three months.

The offer values Celanese's stock at about $2 billion. Another $550 million in Celanese debt and $1.3 billion in commitments to retirees brings the deal to $3.8 billion.

The deal has been endorsed by Celanese management and Kuwait Petroleum, which is the company's largest stakeholder, with a 29% stake. Claudio Sonder, Celanese's CEO, says Blackstone will give the firm more financial flexibility to pursue its strategy of growth in the acetic acid chain, emulsions and other downstream chemicals, and its Ticona technical polymers business.

"We see that there are numerous growth opportunities available in these areas that we can take advantage of with our current structures and means," Sonder says. "However, there are other very attractive opportunities we cannot take advantage of today."

Celanese is also selling noncore assets. Separately, last week it announced the sale of its nylon 6,6 engineering polymers business to BASF by the end of the year. The business generated sales of about $55 million last year.

Earlier this year, Celanese announced the sale of its acrylates business to Dow in a $170 million deal. It also formed an oxo chemicals joint venture with Degussa last fall. At the end of last year, Celanese bought Clariant's emulsions and powders business.

Blackstone endorses this strategy, says Stephen A. Schwarzman, CEO of the investment group. "Blackstone views Celanese as an attractive vehicle for growth with ongoing opportunities for operational enhancements and execution of strategic initiatives, including acquisitions and restructurings."

However, some people think the price is too low. On a conference call between Celanese executives and analysts, one investment banker told Celanese: "I am going to voice my displeasure about the price. It's ridiculous. We're in the beginning of an upturn in the business cycle for your type of company, and I'm sure two years from now we'll be asked to buy this back at a much higher price in an IPO."

Analysts and institutional investors also badgered Celanese about whether the sale was the result of a competitive bidding process. Celanese executives said they had been in discussions with another potential buyer before Blackstone.

Credit-rating agency Standard & Poor's is concerned about the debt needed to fund the transaction.

For the deal to be completed, Blackstone needs 85% of Celanese investors to agree to the offer. In addition to Kuwait Petroleum, institutional investors hold about 55% of the company. Celanese employees and retirees hold some 6% of the company, and retail investors own the other 10%.



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