Negotiations are ongoing and an agreement may be reached this year, said the people, who asked not to be identified as the sale process is private. Stahl, a rival of Clariant, is owned by French buyout firm Wendel, and had expressed an interest in a merger to lower costs and broaden its offering, one of the people said. This statement has also been confirmed to ILM from sources within Stahl that discussions between the companies had taken place.

The leather-services business of Clariant, which has 12 production sites and employs about 700 people, may fetch CHF164 million (US$181 million), according to the average of five analyst estimates compiled by Bloomberg. Representatives for Clariant, Black Diamond, SK Capital and Wendel declined to comment to Bloomberg on a potential deal.

When ILM first broke Black Diamond’s takeover of Germany’s TFL Holding in September it marked the potential start of consolidation in the $4 billion leather-chemical industry, after more than five years of failed attempts by the five dominant companies including BASF and Lanxess to merge assets. Both have subsequently decided to stay in the leather industry after some restructuring.

Clariant this month agreed to sell a unit making detergent and intermediate chemicals to private industrial holding company International Chemical Investors Group for CHF58 million francs, bringing Chief Executive Officer Hariolf Kottmann closer to his goal of focusing on higher-growth markets.

Consolidation in the European leather-chemical industry would be aided by signs of economic resurgence in the euro-area economy. Economic confidence in the area increased more than economists forecast in September, the European Commission in Brussels said Sept. 27. That may spur demand for luxury cars, shoes and handbags.

Clariant, based in Muttenz, tried to sell its leather unit in 2008, and Lanxess and BASF previously discussed combining their assets. BASF in 2011 said it failed to find a buyer for its leather-chemicals assets as offers fell short of its own valuation. The company at the time said it would retain the business after management improved its performance.

Lanxess, which has been in the leather-chemicals industry for almost 100 years, purchased Dow Chemical’s chromium ore operations in South Africa in 2006, and it remains the only supplier with the entire value chain from chrome ore to the leather tanning materials. Stahl, owned by Paris-based buyout firm Wendel, said in August that it continues to “seek out consolidation opportunities.”

TFL, a maker of tanning agents and dyestuffs for leather bags and shoes, fell into the hands of creditors before being sold in a prolonged process. A decade of ownership by buyout firm Odewald & Cie left it with inflated debt at a time when demand was suffering during the economic slowdown in Europe said the Bloomberg article.