CHEMICALS giant Laporte could be set for expansion on Teesside after agreeing a £1.36bn takeover deal with German group Degussa-Huls.

The German company is set to take over Laporte's Fine Organics site at Seal Sands on Teesside, which employs 350 staff, as part of the deal.

The Seal Sands plant is the largest Laporte operation in the UK, producing chemicals for use in the pharmaceuticals and agricultural businesses.

Laporte, which is one of the UK's few remaining chemicals groups, said the company, its staff, and its customers would benefit from being part of a larger firm.

Degussa-Huls said the deal would allow it to "consolidate its position as one of the world's leading suppliers of fine chemicals".

Degussa, which is in the process of merging with German group SKW Trostberg, said that deal would make it one of the world's leading suppliers of speciality chemicals, but it still needed to boost its strength in other fields.

Utz Felcht, chief executive of Degussa, said: "Together with Laporte, new Degussa has all the necessary success factors to be 'Best in Class' in fine chemicals."

Jim Leng, chief executive of Laporte, said: "Over the past four years, Laporte has successfully transformed its portfolio of businesses, and recently we announced the final part of our repositioning with the sale of our non-speciality organics operations.

"Whilst we now have a focused business with an attractive future, we believe Laporte, its employees, and its customers will benefit from the market presence of new Degussa in reaching our planned scale more quickly."

Laporte employs 2,300 people in 12 countries, just over half of whom are in the UK, with the group's largest UK. Its largest plant is at Seal Sands, where £3.3m was invested last year.

Around 23 per cent of staff are employed in Germany.

Mr Felcht moved to reassure Laporte staff by saying the German group wanted to grow the enlarged company, not reduce it.

"This is not a cost-cutting story, it is a growth story," he said.

Responding to concerns that there could be staff cuts, he said: "You can never say you won't cut any jobs, but what I'm saying is, to come out now and speculate whether there will be massive lay-offs is nonsense.

"We want to grow the business."

Both Mr Leng, and Laporte's finance director Michael Kayser will be leaving the group following the integration of the two companies.

The German group, which was formed by the merger of Degussa and Huls in February 1999, and is majority owned by e.on, the German utility, employs more than 44,000 staff overall.

Following the takeover of Laporte, Degussa is aiming to generate cost savings of £12m, by eliminating expenditure in administration costs.

It is also aiming to generate merger synergies of £182m.

Speculation about Laporte's future was sparked early last year when the group revealed it was in talks, believed to be with Swiss firm Clariant, although a takeover deal between the two was never clinched.

Takeover speculation re-ignited in September this year after Laporte sold its commodity chemicals businesses for more than £800m to private equity company Kohlberg Kravis Roberts.

That sale ended a five-year restructuring programme overseen by Mr Leng, to concentrate on speciality organic products and exit from low-margin consumer products.

It was speculated that the company, which has a 118-year history as an independent firm, would then be eyed up as a takeover target.

The takeover of Laporte will leave ICI as the only remaining large chemical group in the UK