2ND LD: M'bishi Chemical agrees to acquire M'bishi Rayon for 200 bil. yen.

TOKYO, Nov. 19 Kyodo

(EDS: UPDATING)

Mitsubishi Chemical Holdings Corp., Japan's largest chemical company, said Thursday it aims to turn major synthetic fiber maker Mitsubishi Rayon Co. into a wholly owned company by next March in a deal that could be worth around 200 billion yen.

Mitsubishi Chemical will launch a tender offer and possibly conduct stock swaps to obtain all outstanding Mitsubishi Rayon shares, according to the joint statement of the two firms.

The merger will cost about 200 billion yen if Mitsubishi Chemical secures all outstanding shares through a tender offer.

The combined sales of the two companies, which have no capital ties, totaled about 3.2 trillion yen in fiscal 2008 through March this year, far larger than those of Sumitomo Chemical Co., the second-largest chemical maker in Japan, at 1.79 trillion yen.

The merger deal is the largest in the petrochemical industry since Mitsui Chemicals Inc. was launched in 1997 through the integration of Mitsui Petrochemical Industries Ltd. and Mitsui Toatsu Chemicals Inc.

Mitsubishi Chemical aims to boost its profitability and enhance its competitiveness in global markets by integrating Mitsubishi Rayon's carbon fiber business, a potential growth field, while Mitsubishi Rayon is seeking to stabilize its financial standing by joining the Mitsubishi Chemical group.

Mitsubishi Chemical Holdings has under its wing Mitsubishi Chemical Corp., Mitsubishi Plastics Inc., and Mitsubishi Tanabe Pharma Corp.

Mitsubishi Rayon is now listed on the first sections of the Tokyo Stock Exchange and the Osaka Securities Exchange.

Petrochemical exports to Chinese and other Asian markets are a major cash cow for Japanese chemicals producers. But they are at risk of getting saddled with excess output capacities because of growing competition with low-priced products made in China and the Middle East.