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Celanese (CE) to Divest Stake in Polyplastics JV to Daicel

Zacks Equity Research

Celanese Corporation CE inked a definitive deal to sell its 45% equity stake in the Polyplastics joint venture to Daicel Corporation for $1.575 billion. Notably, Daicel will own 100% of Polyplastics upon the conclusion of the deal.

Per Celanese management, it intends to use the opportunity to monetize a traditionally passive investment and assign substantial capital to higher growth businesses within Celanese. 

Notably, the deal is expected to fuel future growth and greater opportunities for customer development and expansion. Further, Celanese will compete in countries and areas, where the product lines overlap with Polyplastics (Daicel).

Per management, Celanese’s Engineered Materials unit is well-paced to sustain its growth trajectory to serve customer demand in growth segments and key geographies. Also, the company intends to expand its manufacturing capacity and advance its T&I abilities in Asia to cater to the fast-growing demand in the region.

Celanese plans to use the proceeds from the all-cash transaction in value-generating opportunities. These include an increase in share repurchases that will be accretive to EPS to offset earnings from the Polyplastics joint venture, investments in organic growth and the judicious use of cash in accordance with disciplined capital deployment strategy of Celanese.

Also, the company announced that its board authorized an increase of $500 million to its existing share-repurchase authorization. Notably, the authorization represents roughly 5% of Celanese’s shares outstanding.

Notably, the company expects the deal to close in the second half of this fiscal year, subject to required regulatory approvals and customary closing conditions.

Celanese’s shares have lost 11.4% in the past year against its industry’s 36.7% rise.

 

 

On its first-earnings call,the company expected to generate $300-$400 million of incremental cash on account of the actions that it is presently taking on productivity, working capital management and capital-expenditure prioritization, which enable it to offset challenges related to demand and earnings in 2020.

Celanese also suspended its earlier-announced annual adjusted earnings per share guidance for 2020 due to uncertainties regarding the duration and impacts of the coronavirus pandemic.

Celanese Corporation Price and Consensus

 

Celanese Corporation Price and Consensus
Celanese Corporation Price and Consensus

Celanese Corporation price-consensus-chart | Celanese Corporation Quote

Zacks Rank & Stocks to Consider

The company currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Royal Gold, Inc. RGLD, Sandstorm Gold Ltd. SAND andHarmony Gold Mining Company Limited HMY.

Royal Goldhas a projected earnings growth rate of 62.1% for the current year. The company’s shares have gained 11.7% in a year. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Sandstorm Gold has a projected earnings growth rate of 55.6% for the current year. The stock has grown around 53% in a year. It currently has a Zacks Rank of 2 (Buy).

Harmony Gold has an expected earnings growth rate of 264.3% for 2020. The company’s shares have rallied 154.6% in the past year.It is presently a Zacks #2 Ranked player.

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