Rhodia to sell silicones unit to China's Blue Star
Wed Oct 25, 2006 2:11pm ET
BEIJING/PARIS, Oct 25 (Reuters) - Rhodia has agreed to sell a European-based silicones venture employing 900 people to China National Blue Star Corporation, the French chemicals company said on Wednesday.
Rhodia did not disclose a price for the sale, which should be closed in the next few months, but said it was based on an enterprise value of 400 million euros ($500 million), representing more than 7 times recurring earnings before interest, tax, depreciation and amortisation.
Rhodia, which is restructuring its businesses, brought forward an announcement on the deal from Thursday after a Reuters query concerning comments made by its chief executive, Jean-Pierre Clamadieu, in Beijing earlier on Wednesday.
Clamadieu sketched out the deal in an open meeting between French business leaders and French President Jacques Chirac, who was visibly taken aback at the start of a four-day visit to China designed to highlight French investments there.
"Excuse me, what is it you are selling exactly? How many workers are there?" Chirac asked Clamadieu about the plant in Lyon in southern France.
Employment and French fears of jobs migrating abroad are both sensitive political issues ahead of elections in 2007.
A Rhodia spokeswoman in Paris said the company is a major investor in China and supports more than 3,000 jobs there.
French sensitivities about jobs moving abroad or coming under foreign management were highlighted in another deal on Wednesday when the Paris region awarded a multi-billion-euro trains contract to Canada's Bombardier instead of France's Alstom.
The decision, announced by the Ile de France region and state-owned SNCF railways, is expected to prompt a debate on jobs with some observers saying most of the components for the Bombardier trains will come from Eastern Europe, where wages are lower than in France where Alstom has its plants.
France has drawn criticism for creating barriers to inward investment as part of what the conservative government calls a policy of "economic patriotism." The government argues it only defends sensitive sectors and actual investment is strong.
Clamadieu told Chirac the silicones deal was an example of how important it was to show that France is as keen to welcome foreign investment on its own turf as it is to invest abroad.
Rhodia said on Oct. 9 it was in talks with Blue Star about the future of their silicones joint venture.
Rhodia and Blue Star, part of China Chemical Group Company, last year announced plans to create a silicones joint venture and build an intermediates production unit in Tianjin that was set to start operating in the fourth quarter of 2007. They were also looking at forming a global strategic silicones alliance.
Rhodia has been selling non-core assets over the past three years, focusing on areas where it holds world-leading positions in an effort to return to profit this year.
Rhodia's silicones division, which makes products used in insulation and foams, had sales of 447 million euros in 2005.
A Rhodia sale would follow General Electric Co.'s sale last month of its advanced materials business, which makes silicone-based and other products used in consumer goods and industrial applications, to private equity company Apollo Management LP. ($1 = 0.7934 euros)
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