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Mitsubishi Chem looks to buy Mitsubishi Rayon

Japan's largest chemicals firm Mitsubishi Chemical Holdings  is in talks to buy resin maker Mitsubishi Rayon in a deal worth up to $2.1 billion, the Nikkei business daily reported, part of an acquisition push to help it catch up with global rivals.

A Mitsubishi Chemical spokesman said he “wouldn't deny” that Mitsubishi Rayon was on a list of companies and businesses it was considering for potential acquisitions, but he declined to comment further.

Mitsubishi Chemical shares jumped 5%, while shares in Mitsubishi Rayon, the world's No. 1 maker of materials used for acrylic resin, gained a fifth in value.

“If the report is true, it is positive and a big surprise,” Nomura analyst Shuichi Nishimura wrote in a note.

“It would be industry consolidation, which we have been saying is necessary for the Japanese chemicals sector,” he said.

Global chemicals companies such as BASF are trying to focus on specialized compounds that command premium prices while shedding businesses that are under threat from competition in low-cost countries.

Mitsubishi Chemical has been downsizing its petrochemical operations, which have been losing out to Middle Eastern and Chinese rivals. Instead it wants to build up its offering of value-added materials to catch up with global leader BASF, Dow Chemical and other major players.

Mitsubishi Chemical has said previously that it plans to spend more than 250 billion yen on acquisitions.

The two companies, which do not currently have capital ties, are likely to agree on a deal as early as this autumn and plan to complete the deal in spring next year, the Nikkei said.

A tender offer is expected to be worth 150 billion-200 billion yen ($1.5 billion-$2.1 billion), the paper said. Mitsubishi Rayon has a market capitalization of $1.7 billion. (Reuters)