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April 08, 2002 02:00 AM

Sabic acquiring DSM division

Frank Esposito
Senior Staff Reporter
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    Saudi Basic Industries Corp. has made a much-anticipated move into the global petrochemicals and plastics market by agreeing to buy the petrochemicals unit of DSM NV for almost $2 billion.

    The deal ``will provide [Sabic] with a strong entry position in the European market and a springboard for Sabic's ambition to become a sector leader worldwide,'' Mohammed Al-Mady, Sabic vice chairman and managing director, said in an April 3 news release.

    The affected businesses include major polyethylene and polypropylene production at three plants in the Netherlands and Germany and a PP sales and distribution office in the United States. The units employ about 2,300 and posted sales of about $2.1 billion last year, representing about 30 percent of total sales for DSM, which is based in Heerlen, the Netherlands.

    Plants included in the sale have the capacity to produce about 5.7 billion pounds annually. Included in that total are 970 million pounds of annual linear low density PE capacity, 1.8 billion pounds of LDPE capacity, 660 million pounds of high density PE capacity and almost 2 billion pounds of PP capacity.

    The DSM plants are ``big, large-volume plants that will give [Sabic] a production base outside Saudi Arabia and facilitate their sales in Europe,'' said Robert Bauman, an industry consultant with Nexant Chem Systems in Tarrytown, N.Y.

    Sabic also is widely rumored to be in acquisition talks with Milan, Italy-based petrochemicals maker EniChem SpA. Adding EniChem to the mix would give Sabic an additional 1.3 billion pounds of swing HDPE/LLDPE capacity and 1.7 billion pounds of LDPE capacity.

    In a speech at a recent National Petrochemical & Refiners Association conference in San Antonio, Sabic's Al-Mady said his firm was looking to make a petrochemicals acquisition in North America as well.

    The move is part of DSM's plans to focus on specialty businesses and increase sales 25 percent by 2005.

    Added to existing capacity, the acquisition makes Riyadh, Saudi Arabia-based Sabic the world's third-largest PE maker and fourth-largest PP maker, according to the news release.

    DSM's specialty plastics business, including DSM Engineering Plastics in Evansville, Ind., are unaffected by the Sabic deal. DSM Engineering Plastics produces a range of resins and compounds including nylon and thermoplastic elastomers.

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