Clariant in turmoil after joint venture talks with Sabic collapse

Just one day after Ernesto Occhiello unexpectedly resigned as CEO of Clariant for personal reasons, Clariant and Sabic say they are suspending discussions on the formation of a high-performance materials joint venture.

In a July 25 announcement, Switzerland-based Clariant chalked up the suspension to deteriorating market conditions. Sabic, a Saudi Arabia-based chemical giant, says it “looks forward to continuing these discussions” once conditions improve.

The discussions, if and when they resume, are likely to consider a very different venture.  Clariant now says that it will sell its high-value masterbatches portfolio, once destined to be part of the venture.

Clariant says that proceeds from selling the high-value masterbatches business—along with standard masterbatches and pigment businesses already marked for sale—will go to underwrite investments in new technology for core specialty businesses such as care chemicals and catalysts and to strengthen its balance sheet. Clariant adds that it will also return some of the proceeds to shareholders.

The end of the Sabic joint venture for now is just the latest setback for Clariant, which has been going through a turbulent period. In 2017, Clariant ended talks on a $20 billion merger with Huntsman Corp. following opposition from the activist investors White Tale Holdings and 40 North. Sabic bought the investors’ 25% stake in Clariant in January 2018 for $2.4 billion.

Sabic and Clariant first started talks to set up the materials joint venture in September 2018. The plan was to create a business with $3.2 billion in annual sales by combining Clariant’s polymer additives and high-value masterbatches business with Sabic’s Ultem and Noryl engineering polymer operations and its LNP compounded polymer unit.

Then in October, Occhiello joined Clariant as CEO. He appeared to be just the man for the job since he previously headed Sabic’s specialties business. Among his responsibilities was setting up the materials joint venture. With Occhiello now gone after just 10 months on the job, Clariant Chairman Hariolf Kottmann will take on CEO duties until the firm finds a successor.

Kottmann faces a deteriorating chemical market that is already cutting into Clariant’s results. The firm reported a net loss of $102 million in the first six months of 2019 versus a net gain of $213 million in the same period a year ago. “Despite the uncertainties of the current economic environment, the growth profile of our continuing portfolio remains unchanged,” Kottmann says.