Plans are on hold to combine Clariant AG’s additive and masterbatch business with part of Saudi Basic Industries Corp.’s engineering resins business.
The July 25 announcement came a day after Clariant CEO Ernesto Occhiello unexpectedly resigned after only 10 months on the job.
The companies said plans for a new joint venture have been shelved due to “current market conditions,” to be picked up at a later stage with a different scope.
Clariant and Sabic had signed a memorandum of understanding in September to create a leading supplier of high-performance materials, with potential annual sales of 3.5 billion euros ($3.9 billion).
The JV would have combined Clariant’s additives and high-value masterbatches with Sabic’s Ultem and Noryl resins and its families of LNP compounds and copolymers.
Clariant Chief Financial Officer Patrick Jany told analysts July 25 that Clariant will now sell its entire masterbatch business instead of including it in a joint venture with Sabic.
“As a result for the due diligence over the last few months, we also realized the synergies of combining our high-value masterbatch business with the [high-performance compounds] business of Sabic were less than anticipated,“ Jany said.
This marks the second time in three years that a major Clariant deal has hit a roadblock. In May 2017, the firm announced plans to merge with specialty chemicals and plastics maker Huntsman Corp. That deal was scuttled five months later.
Several market watchers contacted by Plastics News questioned the value of the proposed joint venture.
“Sabic emerged as a white knight to end [Clariant’s] fight with activist investors who had previously blocked [Clariant’s] proposed $20 billion merger with Huntsman in 2017,” Clifford Lee, president of consulting firm Townsend Solutions of Houston, said in an email. “But was a Sabic-Clariant joint venture really the right type of company to be getting into the additives business?
“There might have been synergies between Clariant’s masterbatches and Sabic’s engineering plastic compounds, but adding additives to the mix sounded somewhat unwieldy. The question remains, is an outright acquisition of Clariant by Sabic in the cards?”
Clariant spokeswoman Claudia Kamensky told Plastics News Europe that once negotiations are picked up again, they will include only Clariant’s additives business and the respective units from Sabic.
One market veteran said that putting the terms “specialty plastics” and “$4 billion in sales” together is “a dichotomy by definition.”
“How can you be that large yet truly focus on a customer?” he asked. “I think they both realized that.”
Another longtime compounding executive had similar concerns. “Can a billion-dollar organization truly manage a specialty custom business?” he asked, adding that the specialty compound business of LNP seemed to struggle after it was acquired by GE Plastics, which then was acquired by Sabic.
The delay of the Sabic deal sent Clariant’s stock price down almost 10 percent to 18.10 Swiss francs (US$18.23) on July 25. The price had recovered somewhat to 18.60 Swiss francs in early trading July 26.
As the talks stalled between the two companies, Muttenz, Switzerland-based Clariant announced July 24 that its CEO Occhiello had resigned for personal reasons.
Occhiello had served as Sabic’s specialties executive vice president and was promoted to the top position at Clariant following the Saudi company’s acquisition of a 24.99 percent stake in Clariant in September.
Clariant Chairman Hariolf Kottmann, Occhiello’s predecessor for 10 years, will serve as the interim CEO.
In the July 25 conference call with analysts, Kottmann said Occhiello “had this personal and private reason to ask for the possibility to leave the company at the end of July 2019.”
“I think we have to respect [Occhiello’s] decision,“ Kottmann added. “And I can crystal-clear assure you, it has absolutely nothing to do with the development of our negotiations ... with Sabic.”
In a July 24 statement, Riyadh, Saudi Arabia-based Sabic said that both companies had reached “a common understanding“ to temporarily defer joint venture talks due to current “unfavorable market conditions.”
Shahrzad Pourriahi of Plastics News Europe contributed to this report.
