Exclusive-Solvay in talks with One Investment Management on rare earths partnership

By Melanie Burton and Eric Onstad

MELBOURNE/LONDON, Sept 8 (Reuters) - Belgian chemicals group Solvay is in talks with One Investment Management about a potential strategic partnership for its rare earths business, Solvay told Reuters on Tuesday.     

A deal would give OneIM, run by former SoftBank executive Rajeev Misra, exposure to rare earths processing, complementing its existing investments in the sector, which is dominated by China.

Two sources with knowledge of the matter told Reuters that Solvay and OneIM have been holding talks since March about Solvay's rare earths operations. 

Rare earth minerals are critical for the energy transition, electronics and defence industries, and Western countries are seeking to reduce their reliance on China for supply.

"In response to recent rumors ... Solvay confirms that it is currently engaged in discussions regarding a potential strategic partnership with OneIM regarding its rare earths business," the company said in an emailed statement in response to a query from Reuters.

"There can be no certainty at this stage that these discussions will result in any agreement or transaction. A further announcement will be made if and when appropriate."

Solvay later published a statement to the stock exchange about the talks.

OneIM had no immediate comment. 

Solvay's shares jumped 3% following the news, having been in the red ahead of the Reuters story.

SOLVAY FRENCH PLANT A WORLD LEADER IN 1980S

Solvay's rare earths unit includes a processing plant in France that was among the world's largest four decades ago.

While the business accounts for only a small part of Solvay, which produces chemicals including soda ash and silica, it is considered a strategic asset because of its processing expertise.

The company's 78-year-old processing plant in La Rochelle on France's Atlantic coast set the benchmark for global rare earth prices in the 1980s and 1990s and is one of the only plants outside of China that can separate all 17 rare earth elements. 

OneIM is run by Misra, former CEO of SoftBank Group's massive Vision Funds, and has invested in a string of rare earths companies, some of which have already negotiated supply deals with Solvay.    

Misra stepped down from SoftBank in 2022 to found OneIM along with Yanni Pipilis and other former SoftBank executives.

The alternative investment manager, with offices in Abu Dhabi, London, New York and Tokyo, manages $11.8 billion in assets.

ONEIM HAS STRING OF RARE EARTH INVESTMENTS

Late last month, OneIM agreed to be a cornerstone investor in Viridis Mining and Minerals by providing up to $75 million to the firm developing a rare earths mine in Brazil.

Two months earlier, Viridis signed a letter with Solvay proposing a strategic partnership, including supplying rare earths from its mine to Solvay's processing plant.

OneIM has also invested in two privately held U.S. rare earth magnet producers: $200 million in Noveon Magnetics in January and an undisclosed investment in Vulcan Elements in August. 

In November last year, Solvay agreed a deal to provide rare earths to Texas-based Noveon.

There are at least seven development stages from mining to magnet production, and only a few Western companies with proven technology along that chain. China commands some 90% of global magnet making capacity. 

Rare earths is part of Solvay's Speciality Chemicals division, comprising rare earths and fluorine, which accounted for 15% of sales last year out of a total €4.3 billion ($5 billion).

Solvay posted reported second-quarter core earnings above market expectations in late July and CEO Philippe Kehren said it planned €15 million to €20 million of additional investment to further expand the La Rochelle facility.

    Industrial scale separation of heavy rare earths dysprosium and terbium was due to begin in the autumn, he added. 

($1 = 0.8611 euros)

(Reporting by Melanie Burton in Melbourne and Eric Onstad in London. Editing by Mark Potter)