Arkema Reviews Portfolio as Elliott Builds Stake

(Bloomberg) -- Arkema SA is considering potential asset disposals after the French chemicals producer attracted the interest of activist investor Elliott Management Corp., according to people with knowledge of the situation.

Chief Executive Officer Thierry Le Henaff is taking preemptive action to review Arkema’s portfolio rather than wait for a potential activist campaign or takeover interest, said the people, who asked not to be identified because the matter is private. Elliott has built a small, undisclosed stake in the company but hasn’t said what its intentions are, they said.

Arkema shares jumped as much as 11%, their biggest intraday gain in more than five years, and traded 7.6% higher at 90.88 euros as of 4:47 p.m. in Paris.

Among options under consideration by the company are the sale of a polymethyl methacrylate division worth more than 1 billion euros ($1.1 billion) that makes glass-like polymers, the people said. Evonik Industries AG’s sale of a similar business to Advent International Corp. for about $3.3 billion last year helped increase interest in the unit, the people said.

Another candidate for disposal could be Arkema’s hydrogen peroxide and fluorochemicals divisions, one of the people said. No final decisions have been made, they added. Representatives of Arkema and Elliott declined to comment.

While Le Henaff is credited with an overhaul of Arkema over the past 14 years, the transformation hasn’t been reflected in the company’s share price. The $2.2 billion acquisition of adhesives maker Bostik in 2014 from Total SA was the largest in a string of deals to move the company away from volatile and lower-margin commodities.

The Colombes-based company’s valuation has languished at about 5.7 times enterprise value to earnings, compared with 8.7 times for BASF SE, according to data compiled by Bloomberg. Its shares are down about 12% year-to-date, valuing the firm at 6.9 billion euros.

Shared Goals

Elliott could find common ground with Le Henaff, a well-regarded figure in the industry who has the support of Arkema’s supervisory board. Management efforts to upgrade the portfolio via disposals have been hindered by local regulatory hurdles, with only two asset sales totaling less than 500 million euros in the last three years, according to Mubasher Chaudry, an analyst at Citigroup.

Elliott’s stake “will serve as a potential catalyst for increasing the pace of change, the direction of which should be in the same direction as Arkema’s longer-term strategic goals,” Chaudry said in a note.

In little more than a year, Elliott has pushed for changes at Softbank Group Corp., AT&T Inc., and EBay Inc. The company disclosed a stake in NN Group NV last week saying it will strive for “value creation” at the Dutch insurer.

Elliott has also long targeted chemical companies. It helped spur the break up of Akzo Nobel NV to create a pure coatings company with the sale of a chemicals division to Carlyle Group for $12.5 billion. It took a stake in Danisco A/S, a Danish enzymes and food-ingredients maker in an attempt to disrupt its planned takeover in 2011 by DuPont for about $6.3 billion, a figure it thought undervalued the company.

--With assistance from Dinesh Nair and Myriam Balezou.

To contact the reporters on this story: Andrew Noël in London at anoel@bloomberg.net;Scott Deveau in New York at sdeveau2@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Dinesh Nair, John Bowker

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