Japanese chemical company JSR has changed the sale process for its Elastomer division to a progressive deal in an effort to push up the transaction price.
JSR and sale manager GCA Advisors held the final round of bidding for the Elastomer division on Wednesday (February 24), industry sources said on Friday.
Numerous Japanese chemical companies have joined the race, as well as domestic firm Lotte Chemical. Sources said Lotte Chemical had studied the target, conducting due diligence via a virtual data room and on-site due diligence on core facilities.
There was a big response from bidders in the final round, prompting JSR to open private talks with prospective buyers. However, an industry source said it may not be able to keep control of the deal due to the division’s recent poor performance.
JSR expects the division to record an operating loss of 14 billion yen for 2020, after it lost 5.6 billion yen between April and June and 7.1 billion won between July and September. The division recorded an operating loss of 1.8 billion yen in 2019.
Elastomer was the only one of JSR’s four divisions to run at a loss during those two periods last year. The division recorded revenue of 99.3 billion yen from April to December last year, down 27% from a year earlier.
“Potential buyers have had difficulty valuing the division as it has continued to record losses recently,” said an industry source, adding, “We are paying attention to how much the seller could raise the price by changing the process to a progressive deal.
“It is said that Japanese chemical companies are reviewing the deal quite seriously, so it is likely to take two to three weeks until the preferred bidder is selected.” (Reporting by Byung-yoon Kim)