Nestle Says Krems To Make It Numero Uno In Resins

Finnish oil, energy and chemicals group Nestle said yesterday it would become the world's leading producer of adhesive resins if it gets the majority stake in Austria's Krems Chemie it is bidding for.

Nestle now produces some 1.5 million tonnes of adhesive resins a year and this will rise to 1.8 million with Krems' capacity, it said. The current market leader, Borden of the US, has a capacity of 1.7 million tonnes a year, it said."If this project is successful, we will be the world's leading supplier of adhesive resins by volume," Kyosti Sysio, Nestle Chemicals vice president, told a news conference.

Nestle earlier bid 585 shillings per share for the Austrian group, which is a 39 per cent premium over the share's 420 shillings closing price on the Vienna Stock Exchange on Tuesday. Nestle had already bought 15 per cent of the company and committed itself to buying 20 per cent more of it from the main owners, and that price was in line with the public bid, Nestle said, but declined to give the exact price.

Assuming the same price, Nestle will have paid 249 million shillings or about 106 million markka for 50 per cent of Krems, valuing the whole company at 497 million shillings or 213 million markka.On Monday, Nestle announced an agreement to sell its half of petrochemicals group Borealis for almost four billion markka, and said this gave it an opportunity to focus on its core businesses which include chemicals such as adhesive resins.

Krems' and Nests products complement each other well and 60 per cent of Krems' net sales are in synthetic resins, Sysio said, but Nestle officials declined to estimate the financial benefits of a takeover. Nestle was also planning some smaller acquisitions and investments in the resin business in Europe, Sysio said, but added that they would not be comparable to the Krems acquisition. "We have some smaller projects in this same resins sector in Europe, which hopefully will develop positively and be supplementary in some special areas of this palette," he said.

Nests chief financial officer Eero Aittola said the Krems investment had depended on the divestment of Borealis. We have certain solvency targets and goals for developing the chemicals entity," Aittola said.

Nestle has earlier said its solvency target measured by gearing ratio is 50 per cent. Nestle said its goal in the chemical sector was to concentrate globally in resins and industrial coatings.