German chemicals company Degussa AG has completed most of an ambitious disposal program after agreeing to a €265 million sale of its gelatin business, SKW Gelatin & Specialties, to Sobel NV of the Netherlands.
The deal means Degussa, which German power company E.ON AG owns, has completed 76% of its target of selling, before next year, non-core businesses with total 2000 sales of €6.5 billion.
Degussa is one of several European chemical makers that are selling businesses to focus on specialty and fine chemicals. Dutch rival DSM NV, for example, has appointed Credit Suisse First Boston to find a buyer for its petrochemical unit so it can concentrate on such specialties as life science products and performance materials.
Degussa said the SKW unit, which accounts for 18% of gelatin production volume worldwide and has annual sales of €250 million, is no longer a core business.
"Gelatin is a good but mature business with relatively low growth rates and so no longer fits into our strategic profile," Degussa management board chairman Utz-Hellmuth Felcht said in a statement.
Gelatin, which is extracted from animal bones, is widely used in food products, pharmaceuticals, glues and photographic products.
The deal will propel Sobel, an organic and healthcare products specialist, into the No. 2 position worldwide in gelatin sales by volume behind German rival DGF, said executive chairman Daan van Doorn.
"We know the market very well," van Doorn said in an interview. "This company for years was on my radar screen."
Buying the Degussa unit will give Sobel the flexibility to offer non-beef and non-sheep-based products for the first time in a market still affected by consumer fears of mad cow disease, van Doorn said.
The company also foresees synergies in combining the commercial know-how and operational expertise of SKW Gelatin and its own gelatin subsidiary, GSB.
Degussa, formed by the merger of Degussa-Hüls AG and SKW Trostberg AG, said that including the gelatin business, it has raised more than €3 billion from selling non-core businesses.
Among the biggest were catalytic chemicals specialist dmc2, which was sold to Cleveland-based OM Group Inc. for €1.2 billion; Asta Medica Oncology, sold to Baxter International Inc. of Deerfield, Ill., for €525 million; and Degussa's dental unit which sold for €576 million to York, Pa., company Dentsply International Inc.
The sales have allowed Degussa to pay off a bridge loan taken on to finance the purchase of Britain's Laporte plc last year and bring the group's total debt down to below €3 billion. The SKW deal, which regulators in the United States, Belgium and Spain must approve, is expected to close by mid-February.