Celanese ‘very active’ in M&A space; technology, customer services in focus
Celanese (NYSE:CE), the Dallas, Texas-based technology and specialty materials company, is actively looking for acquisitions and will concentrate its efforts on technology and customer services, according to CEO Mark Rohr.
On Friday’s 2Q14 earnings call, Wells Fargo analyst Frank Mitsch asked about Celanese’s cash usage plans. Rohr said the company had an annual objective to repurchase at least USD 150m of shares, with just more than USD 100m made during the first half.
“When you go beyond that, we still have a good bit of cash on the balance sheet,” he said. “We're very active in the M&A arena, and are looking hard to find ways that we can supplement our portfolio in a very constructive fashion. So hopefully, as we get into this year, you'll see some of that and hear about some of those things.”
Later on the call, BofAML analyst Kevin McCarthy asked Rohr to comment on the type of M&A opportunities sought.
“We're looking for ways that we extend the reach of either our technology-based kind of businesses or our customer solutions kind of businesses,” the CEO replied. “We're very interested in the material space and expanding out in that, everything from biopolymers and cellulosics, through the composites, particularly in aerospace and automotive. [These are] areas that are really emerging areas for us and are really attractive. I think some of the derivatives around C1 chemistry are also pretty much of interest to us, and we're working hard in that area as well.”
Rohr added that while there was nothing to report at present, the team was “working like crazy” with commercial leaders to find good opportunities for its shareholders.
Separately, Morgan Stanley's Vincent Stephen Andrews asked the CEO if the company's sweetener business was core to its portfolio, with the analyst noting that WILD Flavors had recently sold for an attractive multiple relative to Celanese’s trading price. Rohr described Celanese’s unit as “a really interesting business,” which offered a unique perspective on chemical modification and end-market application.
“So that kind of model is an integral part of Celanese,” he added. “Having said that, we have strong ambitions for that business, and we're putting a lot of energy and effort into driving that. If it got to a point where someone else could drive that better, we'd certainly consider that. Right now, we think we're the right company to promote that technology and that brand, and I think inherently it's good for Celanese to have it in a portfolio.”
Celanese engineers and manufactures products for a range of end-use applications including: paints and coatings, automotive applications, performance industrial applications, paper and packaging, chemical additives, consumer and industrial adhesives, and food and beverage applications. The company’s products are organized into six segments: Engineered Materials, Cellulose Derivatives, Intermediate Chemistry, Eva Polymers, Emulsion Polymers and Food Ingredients. The latter includes the company’s Qorus Sweetener System and Sunett Sweeteners.
Celanese’s M&A efforts have been light in the past few years, although it has previously been active on both the buy and sell sides. In April this year, Celanese announced it would consider a joint venture for its Bishop, Texas-based ethanol unit, similar to a USD 800m project for its Clear Lake, Texas-based facility. In May 2013, Celanese formed a 50/50 JV with Mitsui & Co to manufacture methanol at the former’s plant in Clear Lake.
While financial advisory is typically handled in-house on both the buy and sell sides, the company used Dresdner Kleinwort for one of its largest disposals in the last decade. It has worked with numerous law firms during this time, including Germany's Hengeler Mueller for multiple European deals, while Bingham McCutchen was retained for the purchase of Ashland’s Polyvinyl acetate homopolymer and copolymer business in late 2011.
On the call, Celanese reported a cash balance at quarter-end of USD 1.1bn. The company has a market capitalization of USD 9.7bn.