SABIC, Clariant start to work together

SABIC, the Saudi chemical giant, recently completed its purchase of a 25% stake in the Swiss specialty chemical maker Clariant for about $2.4 billion. Now another shoe is dropping.

The two firms say they will create a new high-performance materials business by combining SABIC’s Ultem and Noryl engineering polymer operations and its LNP compounded polymer unit with Clariant’s polymer additives and high-value masterbatch operations. The new business, which would have had sales of about $3.2 billion last year, will be majority owned by Clariant, even though two-thirds of its sales will come from SABIC.

Clariant, meanwhile, intends to divest its businesses in pigments and less specialized masterbatches—polymer beads filled with colors and additive concentrates—by 2020. Together these businesses had sales of about $1.6 billion last year.

The transactions will increase Clariant’s annual sales by only a few hundred million dollars. However, the firm sees the better business mix catalyzing growth in overall sales from about $7.0 billion last year to $9.3 billion by 2021. In addition, Clariant anticipates annual savings of more than $100 million, as well as higher profit margins.

The changes don’t end there. Clariant’s long-time CEO, Hariolf Kottmann, will step down on Oct. 16 to become the firm’s chair. Ernesto Occhiello, now head of SABIC’s specialties business, will become Clariant’s CEO. Occhiello is a former Dow Chemical executive who joined SABIC in 2011.

The developments continue a period of upheaval for Clariant. In May 2017, Clariant and Huntsman Corp. announced plans to merge into what they said would be the world’s second-largest specialty chemical company. However, two Clariant investors, White Tale and 40 North, opposed the deal. Clariant and Huntsman eventually called it off, and the investors sold their stake to SABIC.

For SABIC, the moves are part of an effort to emphasize specialty chemicals. In addition to the deal with Clariant, the Saudi firm intends to establish a specialty chemical business over the course of 2019 that is separate from its core petrochemical operation.