October 20, 2016 / 7:41 AM / 3 years ago

UPDATE 1-SGL to sell graphite electrode unit to Showa Denko in $384 mln deal

* Says sale to fetch at least 200 mln euros in cash

* Says will also sell carbon electrode ops in 2017

* Says mulls launching a rights issue to shore up capital (Adds impairment, planned sale of carbon electrode business, possible rights issue, background)

FRANKFURT, Oct 20 (Reuters) - Germany’s SGL Group is to sell its graphite electrode (GE) business to Japanese chemicals firm Showa Denko in a deal valuing the unit at 350 million euros ($384 million), SGL said on Thursday.

The sale of the business will fetch cash proceeds of at least 200 million euros, it said, but it will also book 40 to 50 million euros of impairment charges on the deal.

SGL has been seeking a buyer for the business, which has been losing money because cheap blast furnace steel from China is taking global market share from operators of electric arc furnaces elsewhere.

The company said on Thursday it would also sell its business making carbon electrodes used to make aluminium in 2017, adding it was confident it could fetch a price above book value.

Both deals will contribute to a significant reduction in group net debt, which stood at about 620 million euros at the end of June. But SGL said it was also looking into whether to make a rights share issue to further improve its capital structure.

The company also said it was withdrawing its profit forecast due to the transformation of its business and would issue a new one with its annual financial report in March.

SGL’s main investors, carmakers VW and BMW <BMWG.DE as> well as BMW shareholder Susanne Klatten and industrial group Voith, are mainly attracted by the future prospects of SGL’s carbon fibres, used for instance in light-weight components for BMW electric vehicles and luxury sedans as well as Audi’s R8 sports cars.

Its other products include carbon anode materials for batteries in Tesla cars and graphite parts for semiconductor production gear. ($1 = 0.9117 euros) (Reporting by Maria Sheahan; Editing by Tina Bellon, Greg Mahlich)

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