LANXESS to acquire Petroflex chemicals group of Brazil

Leverkusen-based specialty chemicals group LANXESS is to acquire an interest of approximately 70 percent in Petroflex S.A, Brazil, at a provisional price equivalent to EUR 198 million. Petroflex, a listed company based in Rio de Janeiro, is among the world’s large-scale producers of synthetic rubber. The stake to be purchased by LANXESS includes the holdings of the current major shareholders Braskem and Unipar. The transaction requires the approval of the relevant antitrust authorities.

“Petroflex ideally complements our product portfolio and strengthens our position in one of the world’s most important growth markets,” said LANXESS Management Board Chairman Axel C. Heitmann. “In this way we are significantly expanding our position in Latin America as a whole.”

LANXESS will submit a public takeover offer for the remaining ordinary shares at the proper time under Brazilian law. „As is customary with such transactions, the final purchase price, including financial liabilities to be assumed, will be determined after closing,” explained Chief Financial Officer Matthias Zachert. „We are financing the acquisition from liquidity and existing credit facilities,” he added. The financial liabilities as of September 30, 2007, amounted to EUR 109 million.

In 2006 Petroflex had some 1,300 employees and sales equivalent to about EUR 500 million. The group’s 2007 output at its three sites in Brazil – Cabo in Pernambuco State, Duque de Caxias in Rio de Janeiro State and Triunfo in the State of Rio Grande do Sul – will exceed 400,000 tons. Its elastomer products range from solution rubber to emulsion rubber and comprise 70 brands. The products are used especially in the manufacture of tires as well as for tubing and plastics. One third of its output is exported to more than 70 countries.

The market for rubber in Latin America is expected to grow rapidly in the coming years. According to the information available to LANXESS, the major global tire manufacturers are spending around EUR 1 billion to increase their production capacities in Latin America, said Heitmann. Consumption of synthetic rubber in the region is currently well below that in the industrialized countries and also below the global average.

Petroflex S.A. was founded in 1962 as part of Petrobras, a Brazilian chemicals group that was already a leader at that time. In the 1970s Petroflex became independent. In the following decade, Petroflex S.A. extended its international activities to Europe, Asia and North America.

LANXESS currently employees more than 400 people in Sгo Paulo, Porto Feliz and Sгo Leopoldo, Brazil. Since LANXESS became independent in January 2005, it has experienced double-digit growth rates in Brazil, posting sales of approximately EUR 160 million in 2006. In terms of sales, Brazil is now the second-largest market for LANXESS in the Americas region after the United States.

Said Heitmann: “We are pleased that we so quickly succeeded in implementing a major factor for our company’s successful positioning as announced at our Capital Markets and Media Day in September.” The Management Board Chairman also confirmed previous guidance that LANXESS will post EBITDA pre exceptionals of between EUR 700 million and EUR 720 million for the full year 2007, against EUR 675 million in 2006.

At their meetings on Thursday the Management Board and the Supervisory Board agreed on a realignment of LANXESS’s dividend policy with the intention of significantly and sustainably raising the dividend. The final dividend proposal will be made on the basis of the confirmed financial statements of LANXESS AG for fiscal 2007 and published together with the Notice of the Annual Stockholders' Meeting of LANXESS AG, to be held in Cologne on May 29, 2008.

LANXESS is a leader in specialty chemicals with 2006 sales of EUR 6.94 billion and around 14,500 employees in 21 countries. The company is represented at 47 production sites worldwide. The core business of LANXESS is the development, manufacture and sale of specialty chemicals, plastics, rubber and intermediates.