Solvay announced on 11 January it had filed an application for a listing of its shares on NYSE Euronext Paris as of 23 January. The company had already indicated it might apply for such a listing at the time when the Rhodia acquisition intent was announced, so that news was no real surprise.
The decision to apply for a French listing is motivated by the fact that France is from an industrial viewpoint the most important country of the group. The group has 15 production sites in France, five R&D centers and about 7,000 employees in the country. Solvay is a global group with pro-forma revenue of about € 12bn (2010 data) of which about € 1.3bn was generated in France. On 20 January NYSE Euronext Paris announced the admission of trading of the Solvay shares as of today.
Furthermore, Solvay announced this morning the creation of Solvay Energy Services. This new entity aims to optimize the energy costs/purchases and CO2 emissions management of the new combined group. The new Solvay group purchases about € 1.2bn energy per annum, and manages co-generation facilities with 1000MW production capacity.
The second listing in itself does not change our investment thesis, although positive is that it might help to improve the share’s liquidity. We also believe the share might in term be eligible for inclusion in the CAC40-index given the company’s significant French industrial presence and the fulfilment of other criteria (market cap size, free float, velocity, etc).
The creation of the Energy Services unit is called the first outcome of the integration of Solvay and Rhodia and seems a logical area of integration focus given its size (€ 1.2bn). Solvay does not provide a specific savings target for the Energy Services unit but this is part of the € 250m integration target and hence no real surprise.
No change to our Accumulate rating and € 90 target price.