* Deal could be signed in next few weeks -sources
* Talks with other potential partners have been difficult -sources
* Shares up 2.4 pct (Adds possible valuation, deal logic for Lanxess, Ineos)
By Arno Schuetze and Matthias Inverardi
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FRANKFURT, Sept 10 (Reuters) – German speciality chemicals company Lanxess is in talks to put its main synthetic rubber business into a joint venture with petrochemicals group Ineos, four people familiar with the matter told Reuters.
Financial terms and the size of the stakes to be held in the new entity have yet to be agreed, but Ineos has jumped to the head of a queue of interested parties and a deal could be signed within the next few weeks, the sources said.
Lanxess has also held talks with Saudi Arabian Oil Company (Saudi Aramco) and Russia’s NKNK and Sibur , but negotiations over the sale of a stake or pooling of assets have proved difficult, other sources familiar with the matter said.
Shares in Lanxess were up 2.4 percent by 1218 GMT, reversing earlier losses.
Saudi Aramco, Sibur, NKNK and Lanxess declined to comment and Ineos did not respond immediately to requests for comment.
The search for a strategic partner for the leading global player in synthetic rubber began more than a year ago as the company sought to combat oversupply in the industry.
Lanxess has asked prospective partners to submit final offers in the next few weeks, one person familiar with the matter said.
Chief Executive Matthias Zachert has said the group could partner with a supplier of butadiene to be less exposed to swings in the market for synthetic rubber’s main raw material.
GOOD FIT
Ineos would be well placed in that capacity because its petrochemical plants in Germany already supply a large part of the feedstock Lanxess needs at the factories near its Cologne headquarters.
For Ineos, Europe’s biggest supplier of butadiene, a tie-up would provide a captive user of its petrochemical materials and help to improve utilisation rates at its plants, mainly in Germany.
Zachert has also raised the prospect of a deal with a rival rubber maker. Sibur and NKNK would fall into that category, though Lanxess has never confirmed their interest.
Yet Lanxess will face fewer political hurdles if it teams up with Switzerland-based Ineos, sources said. Germany has criticised Saudi Arabia for its human rights record while ties with Russia have become strained because of the Ukraine conflict.
Ineos owner Jim Ratcliffe, however, is known to be a tough negotiator and a fierce cost-cutter.
Talks with Saudi Aramco have not progressed partly because it would have preferred a full acquisition of Lanxess, a request that was swiftly rejected, two people familiar with the matter said.
Lanxess started last month to split off its rubber operations — including tyre rubbers and materials for windscreen wipers, brake hoses, sealant and transmission belts — into a separate legal entity to pave the way for a tie-up with an external partner.
Industry experts have said Lanxess’s synthetic rubber business could be valued at about six times annual earnings before interest, tax, depreciation and amortisation (EBITDA).
Adjusted EBITDA for Performance Polymers, the Lanxess division that houses the rubber activities, was 392 million euros ($438.7 million) in 2014 and EBITDA growth at the division was 13.4 percent in the first half of this year. ($1 = 0.8937 euros)
(Additional reporting by Ludwig Burger and Patricia Weiss in Frankfurt, Reem Shamseddine in Khobar and Katya Golubkova and Vladimir Soldatkin in Moscow; Writing by Ludwig Burger; Editing by Georgina Prodhan and David Goodman)
