Negotiations between Saudi petrochemicals firm Sabic and Clariant over the creation of a new stand-alone specialties business have come to a temporary halt, less than a year after the two companies unveiled plans for the joint venture.
The announcement came a day after Clariant’s CEO Ernesto Occhiello resigned unexpectedly on July 24, after only 10 months at the top job.
In separate statements, the two companies said the plan for the new JV had been shelved due to "current market conditions," to be picked up at a later stage with a different scope.
“Both parties are obliged to act in the best interest of their respective shareholders. If you cannot reach an agreement that satisfies both sides in the current market environment it’s best to temporarily suspend the negotiations,” said Clariant chairman Hariolf Kottmann said in written statement to Plastics News Europe July 25.
“You need to find a compromise, if you don’t it’s better to take a bit of time,” Clariant CFO Patrick Jany also told Bloomberg.
In a July 24 statement, Sabic said that both companies had reached “a common understanding" to temporarily defer these discussions due to current "unfavorable market conditions".
As the talks stalled between the two companies, Clariant announced July 24 that its CEO Occhiello had resigned for “personal reasons”.
Occhiello served as Sabic's specialties executive vice president and was promoted to the top position following the Saudi company's acquisition of a 24.99 percent stake in Clariant last September.
Kottmann, Occhiello’s predecessor for 10 years, has been asked to assume his responsibilities in the interim as executive chairman until a successor is found.
“Clariant will continue to implement its strategy and intends to continue to profitably grow in the market by providing specialized products and solutions that meet global challenges with attractive prospects and above average growth potential. This is safeguarded by a stable structure of shareholders who support our strategy,” said Hariolf Kottmann following Occhiello’s resignation.
Clariant and Sabic signed a memorandum of understanding in September last year to merge parts of their businesses in a bid to create a leading supplier of high-performance materials (HPM), with potential sales of 3.5 billion euros ($3.9 billion) per year.
The JV would have combined the Swiss company’s additives and high value masterbatches (color, high temperature resins and health care) with Sabic's Ultem and Noryl resins, and its families of LNP compounds and copolymers.
Clariant was to hold a majority stake in the JV and was set to pay an "equalization consideration" to Sabic for the value of its contribution to the intended business.
However, in its latest statement July 25, Clariant confirmed that as part of its portfolio upgrade, it had decided to divest the entire masterbatches business including both, standard and high value masterbatches.
“During the due diligence process, we found out that it [the JV] wouldn’t bring the synergies [we expected],” Clariant spokeswoman Claudia Kamensky told PNE.
This means, she added, once the negotiations are picked up again, they will include only Clariant’s additives business and Sabic’s respective units.
The Swiss company also said that it would continue with its plans to shed its pigments business.
The divestments are expected to be concluded unchanged by end 2020.