Lanxess (Leverkusen / Germany; www.lanxess.com) has found, in Ineos (Lyndhurst / UK; www.ineos.com), the long-sought partner for its "Lustran Polymers" (www.lustranpolymers.com) ABS unit – see Plasteurope.com Web of 22.03.2007. The British company, which has built up an extensive plastics business through acquisition over the past several years, initially will pay Lanxess EUR 35m to take 51% of a new joint venture, to be formed by September 2007. After two years, Ineos will acquire the jv at a price tied to certain business targets.

In a conference call with analysts, Lanxess CFO Matthias Zachert outlined the terms of the agreement. In 2009, he said the Leverkeusen company will receive, as a final payment, five times EBITDA averaged over the two-year period for its share of the jv. If the earnings tally is negative, Lanxess will not be held liable. Zachert said management, which had been trying to sell the business outright, had to make concessions. Due to the uncertain earnings outlook, it was unable to reach agreement with Ineos on an acceptable price for the entire business.

As part of the deal inked in the early hours of 28 June, the former Bayer chemicals unit will not make any further investment in the ABS producer, which employs 1,600 people at production sites in Dormagen / Germany, Tarragona / Spain, Addyston, Ohio / USA, Map Ta Phut / Thailand and Vadodara / India – the latter part of a 51:49 joint venture. In 2006, the ABS company spun off from Lanxess last year posted its first positive EBITDA, pre-exceptionals, of EUR 16m on sales of nearly EUR 900m. The target for 2007 is EUR 40m.

Lanxess declines to disclose its capacity for ABS, saying only that – without any world-scale facilities – it is too small to be competitive. In contrast to its larger rivals, Lustran specialises in pre-coloured material. The link-up with Ineos back integrates the company's ABS polymer production into its three main raw materials – acrylonitrle, butadiene and styrene. At the same time, it gives the British group a captive downstream customer for its styrenic products. High prices for raw materials have put increasing pressure styrenic copolymers producers in recent months. Lustran had an earnings margin of only 1.8% last year.

Privately owned Ineos, founded in 1998 by CEO Jim Ratcliffe, is now regarded as the world's third largest independent chemical company, behind BASF and Dow, with annual sales of around USD 38 bn. By acquiring and integrating underperforming assets of other companies, Ineos has been a driving force in consolidation of the commodity plastics sector in recent years. The Lanxess buy is its first foray into engineering plastics. This year, deals have been struck with Borealis and Norsk Hydro (see Plasteurope.com Web of 07.06.2007) along with Nova Chemicals (see Plasteurope.com Web of 27.03.2007).