Lubrizol CEO Admits He Scared ‘The Bejeebers’ Out Of Analysts
Aug03

Lubrizol CEO Admits He Scared ‘The Bejeebers’ Out Of Analysts

And the award for outstanding achievement in the field of leveling with analysts goes to James L. Hambrick, CEO of Lubrizol. During his prepared remarks during Lubrizol's Q2 earnings conference call, he told analysts that he didn’t want to talk about his company’s bidding war with BASF to buy Cognis by, well, saying much more about the failed takeover attempt than any other CEO would spend talking about a failed takeover attempt: “I have nothing I can tell you in terms of portfolio enhancements. We're going to continue to work that space. Some of you may want to talk about the Cognis acquisition, I don't intend to spend any time on that this morning. We were not successful, it was a large deal, I know it scared the bejeebers out of some of you, but it's not very often that you could put together a bolt-on in personal care, in coatings, and in the industrial space. The only thing that was really wrong with it was it all came at us at one time and we weren't successful.” BASF inked a deal in late June buy Cognis for $3.8 billion. There were many leaks about the negotiation process before the deal was announced. Lubrizol supposedly had a bigger offer on the table, but the financing wasn’t as ironclad as BASF’s. As far as the scaring the “bejeebers” out of analysts goes, Lubrizol only has about $4.8 billion in revenues in 2009, making a $4 billion acquisition rather steep. Big acquisitions normally transform companies, but often into debtors-in-possession. However, Lubrizol did rack up $500 million in earnings from those revenues, not a bad record in a recessionary year. And let us not forget that when Lubrizol bought Noveon in 2004, it had about $2 billion in sales while Noveon had about $1.2 billion. Hambrick says Lubrizol isn’t out of the hunt: “We'll move on, we have other assets that we're looking at, other opportunities. I'm working at it full-time even as during the course of this week and will continue to work that. Our first priority is to invest in the business to sustain it and keep it moving. Our second priority really is what I would call the duet of portfolio enhancements and share repurchases. It's the proper use of our cash balance for the benefit of shareholders.” Odds are he won’t find a purchase that will push all of Lubrizol’s buttons like Cognis would...

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Is BASF The Only Suitor Standing For Cognis?
May07

Is BASF The Only Suitor Standing For Cognis?

I recently discussed published reports indicating that Lubrizol and BASF were eying Cognis, the private equity owned former specialty chemicals business of Henkel. Now, according to Reuters, quoting “three sources with knowledge of the matter”, BASF may be in advanced talks and preparing a bid for Cognis. Last week, Lubrizol CEO James Hambrick, addressed the acquisition rumors with analysts by detailing Lubrizol’s acquisition strategy. He said that he was looking to make purchases in Lubrizol’s consumer specialties, performance coatings, and engineered polymers businesses, which are part of its advanced materials segment. He also said the company aimed to make acquisitions in its industrial additives business, part of its additives segment. However, he went on to stress the need to make acquisitions in the three advanced materials segment businesses, which need to grow from $500 million in annual revenues to about $1 billion to achieve the scale that the company enjoys in its additives segment units. He also said he was unwilling to add businesses new to Lubrizol. “We already have ample growth space within our existing portfolio,” he said. Hambrick added that he was looking for “bolt-on” acquisitions in the “$100 million to $500 million range”. Presumably he meant price, but he might have meant sales, which would be a number on the same order of magnitude as price anyway. “We will evaluate opportunities outside of this size range, depending on the candidate,” he said. Cognis, with $3.6 billion in revenues in 2009, is way out of this size range. It is, in fact, three quarters the size of Lubrizol. But Cognis would align nicely with Lubrizol, adding to industrial additives and consumer specialties and other areas that Lubrizol is in. It could be that Hambrick was trying to dampen expectations. Cognis might have been a good acquisition, but perhaps the price wasn’t right. It could be that Lubrizol is still a contender for the business after all.  When people leak things to the press, they leak them for a reason. The people that leaked the story to Reuters may be Cognis’ owners putting pressure on the non-BASF bidders in the process, much like  a used car salesman does when he tells you that a nice couple was in earlier that day interested in the same Oldsmobile Custom Cruiser that you are looking at. I would guess, however, that the acquisition is out of Lubrizol’s price...

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