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March 15, 2022 04:20 PM

Solvay plans split into two public companies

Frank Esposito
Senior Staff Reporter
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    Solvay lab_i.jpg
    Solvay SA
    Two researchers at a Solvay lab in Bollate, Italy.

    Global plastics and chemicals maker Solvay SA plans to split itself into two publicly traded companies.

    In a news release, officials with Solvay in Brussels described the proposed new firms as SpecialtyCo, a "pure play specialty leader with accelerated growth potential" and EssentialCo, an essential chemicals leader with "resilient cash generation."

    Solvay's plastics and composites businesses would be included in SpecialtyCo. Officials said the proposed split "is designed to sharpen strategic focus, optimize growth opportunities and build the foundation for the future."

    "The plan to separate into two leading companies represents a pivotal moment in our journey to transform and simplify Solvay," CEO Ilham Kadri said in the release.

    "Notwithstanding the challenges of the current global environment, we are confident that pursuing this plan would enable us to create compelling value for shareholders over the long term," she said.

    Market veteran Phil Karig, managing director of Mathelin Bay Associates in St. Louis, said the proposed split "can be viewed from two, interrelated perspectives."

    First, he said, breaking the companies in two will allow each to organize and follow strategies more suited to their markets and operations rather than having to compete for attention and resources "under a larger umbrella."

    Second, Karig added, the split allows stock market analysts and investors to focus on two companies that will be more "pure play" than their predecessor, presumably with the hope that the sum total shareholder value of the parts will be greater than the whole.

    Solvay officials said SpecialtyCo "would provide innovative, value-added solutions that support a more sustainable world, driving above market growth and strong returns."

    That proposed firm's materials segment "has the broadest portfolio of unique, patented materials based on high-performance polymer and carbon fiber composite technologies, with leading global positions in all core markets," they said. "These businesses have a strong track record of above-market growth, supported by underlying megatrends including electrification, lightweighting, sustainable mobility, and digitalization."

    Solvay's materials unit posted sales of 2.9 billion euros ($3.2 billion) in 2021, up more than 7 percent vs. 2020. Specialty Polymers made up about 75 percent of the unit's sales, with the remainder coming from Composite Materials.

    Solvay's per-share stock price began the year near 104 euros ($115), but was under 94 euros ($104) in early trading March 17.

    Under the separation plan, Solvay's shareholders would retain their current shares of stock, which will continue to be listed on Euronext Brussels and Euronext Paris. The separation would be done by a partial demerger of Solvay whereby the specialty businesses will be spun off to SpecialtyCo.

    The composition of the boards and management teams, as well as naming for each company, will be provided at a later date. The transaction expected to be completed in the second half of 2023.

    Solvay employs more than 23,000 worldwide and posted sales of $11 billion in 2021.

    Globally, Solvay has almost 100 production sites. Plastics-related sites include ones making polysulfones in Marietta, Ohio; composites in Piedmont, S.C.; composite tape in Anaheim, Calif,; fluoropolymers in Tavaux, France; and Changshu, China; and polyetheretherketone (PEEK) and other specialty resins in Alpharetta, Ga.

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