History of Evonik Industries
Although Evonik Industries AG was not formally established until September 12, 2007, it was not a newly founded company at the time it transformed itself from the former RAG Beteiligungs AG. Although one could briefly summarize the history of Evonik in this manner, doing so would overlook unique historical and political industry developments that are well worth considering.
In terms of legal status, the history of Evonik Industries dates back to the year 1968, when Ruhrkohle AG was founded on November 27 in Essen as a joint venture of Ruhr mining companies on the basis of a federal statute. This company initially combined some eighty percent of Western German coal mining capacities and also acquired the remaining coal mining companies over the course of the following decades. The lack of competition in German coal production led to continuous rationalization measures, which gradually reduced these mining activities (the so-called "black" activities of the company) in spite of considerable state subsidies, while Ruhrkohle AG successfully managed the socially responsible reduction of a six-digit number of workers. In contrast, the unsubsidized non-mining activities (the so-called “white” activities) of the company were in part highly profitable and included the majority share in the power company Steag AG, the chemical corporation Rütgerswerke AG, or the holding in Ruhrgas AG. A “joint liability” existed between the black and the white area of the Group, which meant that the assets of the white area provided a guarantee for the economic risks of mining. Furthermore, the profits of the non-mining activities were needed to reduce public subsidies for coal mining. Ruhrkohle AG never paid any dividends to its shareholders, most of them mining or energy companies.
In the 1990s, Ruhrkohle AG responded to the changed priorities within the company with restructuring. As of early 1994, the company was a “fictitious" holding structure because the coal mining activities now concentrated in Ruhrkohle Mining still were directly managed by the parent company, Ruhrkohle AG. The actual holding area, which included Steag AG, the newly founded RAG Immobilien AG, or Rütgerswerke AG, were bundled in RAG Beteiligungs-GmbH. Two years later, the name of Ruhrkohle AG was replaced with the less specific acronym RAG AG that was already in frequent use.
After the year 2000, the future viability of RAG was increasingly questioned in light of the rapidly shrinking mining sector and the declining political and public support for the consistently high subsidy costs. The objectives for the complete restructuring of the Group, which began in 2002 after weighing alternative options, can be described as follows:
- Continued, coordinated withdrawal from coal mining,
- Private-industry financing of the so-called “indefinite liabilities” after the end of active mining, and accordingly,
- Consistent decrease and eventual end of state subsidies, and
- Creating a new industrial base in a dedicated industry group, which was to include the “white” area.
The subsequent restructuring, which among other developments would end in the establishment of Evonik Industries AG, began when E.ON AG, one of the primary shareholders of RAG AG, expressed an interest in the strategically important Ruhrgas share of RAG. After lengthy negotiations and the intervention of a minister, RAG eventually transferred its Ruhrgas holdings to E.ON in early 2003 in exchange for 46.5% of the specialty chemicals company Degussa AG of Düsseldorf, which had previously been primarily owned by E.ON. This was a crucial juncture, and RAG decided in 2003 to make Degussa AG the core of its future industrial activities. It acquired another 46.5% of Degussa from E.ON AG in transactions of June 1, 2004 and March 17, 2006 and ultimately was able to fully take over Degussa after compensating the remaining minority shareholders on September 14, 2006. To finance this transaction, RAG divested some 280 companies with revenues of €4.5 billion between 2003 and 2005 and also sold off the Degussa construction chemicals segment in 2006.
RAG then included the newly acquired Degussa AG into its holding structure, RAG Beteiligungs GmbH (AG from October 2006), which already included the strategically important subsidiaries Steag AG und RAG Immobilien AG. This is where the cycle closes because, as mentioned above, RAG Beteiligungs AG became Evonik Industries in 2007 with the three Business Areas Chemicals, Energy, and Real Estate.
None of this would have been possible without the consent of the remaining shareholders of RAG (the four corporations RWE AG, E.ON AG, Thyssen-Krupp AG, and Société Nouvelle Sidéchar S.A.). Each of them placed their shares into a dedicated foundation, RAG Stiftung, on June 26, 2007 for the symbolic price of one Euro. In late 2007, Evonik Industries then passed from the possession of RAG to the ownership of RAG Stiftung. The purpose of the Foundation, which was legitimized by a federal act of November 8, 2007, is to help fund the closure of Western German coal mining with dividends of Evonik Industries AG, revenue from selling Evonik shares, and using the resulting capital yield. In addition, it will bear the cost of continued, so-called "indefinite liabilities."
RAG Stiftung achieved its first major success in fulfilling this purpose when it managed to sell 25.1% of the shares in Evonik Industries to a fund advised by a British investor for €2.4 billion.
Although it had been started as a mixed-portfolio corporation in 2007, Evonik Industries changed course two years later and is now positioned as an exclusive specialty chemicals company. This decision was made to account for the weight and profitability of chemicals in the company. Accordingly, energy and real estate activities were no longer considered core business and are now holdings that are slated for divestment in the medium term. The municipal utility consortium Stadtwerkekonsortium Ruhr has already acquired 50.1 percent of Evonik Steag GmbH, which then left the Evonik scope of consolidation.
In a parallel step, the real estate business also became independent and Evonik and the Essen-based real estate company THS pooled the management of their real estate holdings with over 125,000 housing units in the joint venture Vivawest Wohnen GmbH effective January 1, 2012.