David Einhorn pitches Lanxess at Sohn 2025

Summary

• Einhorn’s 2025 Sohn pick is Lanxess, a German specialty chemicals company Greenlight sold in 2010 in the low 40s as “the second most profitable investment in Greenlight’s history” — the stock now sits about a third below that sale price and just over half its 2014 level. He’s riding a streak: last year’s pitch (likely Solvay, garbled as “Salve”) returned 25% with dividends, Vitesco before that rose ~50%, preceded by gold at 1,850 an ounce and likely Teck Resources at +58%.
• The core setup: management made excellent strategic decisions and got punished by bad luck. CEO Matthias Zachert shed the cyclical commodity businesses (Arlanxeo, Currenta, leather, Urethane Systems) and bought specialty niches — yet “the market likes to value Lanxess at around five to six times EBITDA, even though it has sold its bad businesses at multiples that are much higher than that.”
• The bad-luck stack is specific and largely behind: European gas went from 12/MWh in 2020 to a peak of 339/MWh in August 2022 — over 27x — letting Chinese and Indian competitors undercut on price; an SAP rollout forced buffer inventory built at peak costs and dumped into falling prices; 2023 EBITDA fell 45% to €512M, leverage hit ~5x, Moody’s cut to Ba3, and the dividend was slashed 90%.
• The hidden asset: a put option on its 41% Envalior stake, exercisable to Advent starting next year at ~12x trailing EBITDA, with Lanxess choosing the timing. At the midpoint of S&P’s €475–525M 2026 EBITDA estimate — which Einhorn believes is below internal forecasts — the stake could fetch ~€860M in early 2027, over one-third of the current market cap. “Some bearish sell-side analysts value the Envalior stake at zero.”
• Einhorn frames Lanxess as a possible tariff beneficiary: almost 30% of manufacturing capacity is in the US, where in parts of advanced intermediates it is “the sole remaining US producer” facing Chinese imports — a pricing umbrella to “raise price or gain share or both.” He hedges hard: “it’s impossible to quantify the benefit or even know if it will materialize.”
• The math: capacity utilization recovering from 67%, destocking nearly done, and Germany’s €500B infrastructure package should increase Lanxess’s baseline volumes by ~6% in 2026 and more after, could drive over €900M adjusted EBITDA in 2028 — still below pre-COVID margins. A 6x multiple implies ~€50/share at end-2027; a rerate to 7–8x (still a discount to Akzo Nobel and Croda) implies €60–71; buybacks could add another €15/share.

Deep dive

1. A streak of unloved European names — and a self-deprecating tariff joke

• Einhorn opens with a gun-to-the-head joke as a tariff-policy metaphor: as of a couple weeks ago the tariff policy was pointing the gun at its own head; now “he’s waving it around the room and he’s maybe pointing it at his knee or his foot.”
• The setup for credibility: last year’s European pick (likely Solvay) has returned 25% including dividends; Vitesco rose ~50% in six months before a takeover; before that, gold at 1,850 an ounce and likely Teck Resources at +58%. “Let’s see if we can get this streak going.”

2. Lanxess: excellent decisions, terrible luck

• Greenlight knows the company — it sold Lanxess in 2010 in the low 40s as the second most profitable investment in the firm’s history. Fifteen years on the stock is about a third lower, and just over half of where it stood when Matthias Zachert returned as CEO in 2014. “This company has not been a compounder.”
• Zachert’s transformation: out went Arlanxeo, Currenta, organic leather, the Envalior majority (2023, retaining 41%), and finally Urethane Systems this year; in came Chemours’ clean-and-disinfect unit, Chemtura, Emerald Kalama, and IFF’s microbial solutions. Einhorn’s tell: the market likes to value Lanxess at 5–6x EBITDA while its “bad” businesses sold for much more. “We think we are left with a butterfly which is being perceived for the moment as a moth.”
• What’s left: three segments — consumer protection, specialty additives (including an Arkansas bromine well with a 70-year reserve), and advanced intermediates — with Lanxess top-three globally in every business unit, mobility cut from ~40% of sales to 10%, and 35% of sales now in the Americas.

3. The perfect storm: energy, SAP, destocking

• Since the month before Russia invaded Ukraine, shares have halved while the Stoxx Europe 600 returned 9%. European gas went 12/MWh → 339/MWh at its August 2022 peak, an increase of over 27x, with the average price in 2022 13 times higher than in 2020, and “Europe basically had no energy substitution” — Chinese and Indian rivals took both margin and share.
• The SAP implementation “turned into the usual nightmare”: buffer inventories built at peak prices had to be sold into falling markets, crushing 2023 gross margins. Utilization slid 79% → 69% → 58% before rebounding to a still-low 67% in 2024; EBITDA fell 45% to €512M, leverage neared 5x, and the dividend was cut 90%.

4. Derisked and possibly tariff-advantaged

• Urethane proceeds should take pro-forma net debt to €2.1B — about 3x EBITDA by year-end, targeting below 2x — with capex needs of only €300–350M annually and 2025 guidance of €600–650M EBITDA, ~10% higher organically than 2024.
• The tariff angle, carefully hedged: with ~30% of capacity in the US and sole-producer positions against Chinese imports, tariffs “create a pricing umbrella” — but “it’s impossible to quantify the benefit or even know if it will materialize.” Guidance predates Liberation Day, so this is only potential upside.
• Tailwinds stacking: destocking “nearly done,” Germany’s €500B infrastructure package should increase baseline volumes by ~6% in 2026 and more after, agriculture and European construction at cyclical troughs, and a Russia–Ukraine peace deal as a reconstruction kicker.

5. The Envalior put and the path to €50–71

• The kicker: Lanxess can put its 41% Envalior stake back to Advent from next year at ~12x trailing EBITDA, choosing its moment. At the midpoint of S&P’s €475–525M 2026 estimate — “we believe below the company’s internal forecast” — the stake could fetch ~€860M in early 2027, over a third of market cap; “every hundred million of extra EBITDA is worth $500 million to Lanxess.” Some bearish sell-side analysts value it at zero.
• The valuation ladder: utilization recovery could produce over €900M adjusted EBITDA in 2028 — still short of pre-COVID profits. Six times = ~€50/share end-2027; a 7–8x rerate (still below Akzo Nobel and Croda) = €60–71; buybacks at 3x debt to EBITDA before the Envalior sale and 2x after could add ~€15/share, assuming the stock rises 20% a year — “obviously, if the stock went up faster, the buyback would have a smaller impact. We could live with that.”