SABIC SNAPS UP STAKE IN SWISS SPECIALITY CHEMICALS COMPANY

Riyadh petchems producer in the midst of restructuring and expansion to become largest shareholder in Clariant

Saudi Basic Industries Corporation (Sabic), the Middle East’s biggest petrochemicals producer, has agreed to buy a 24.99 per cent stake in Clariant, becoming the largest shareholder of the Swiss speciality chemicals company.

Sabic is acquiring about 83 million shares in Clariant from 40 North and Corvex Management, the firm said yesterday without saying how much it is paying for the deal.

Reuters estimated the transaction value at $2.4 billion, based on Clariant’s market capitalisation.

The purchase amount does not exceed 10 per cent of Sabic’s net assets and the deal will be financed through foreign banks, the company said in a separate statement to the Saudi Stock Exchange, where its shares are traded.

It did not name the lenders. The financial impact of the transaction will be reflected in Sabic’s first quarter results this year.

At present the company has no plans to launch or otherwise effect a full takeover of Clariant, and the closure of the transaction is subject to regulatory approval, it said. “This acquisition is part of Sabic’s long-term growth strategy to remain committed to product differentiation,” said Yousef Al Benyan, Sabic’s vice chairman and chief executive.

“Clariant is complementary to Sabic’s existing specialities business and is well in line with Sabic’s strategy of opening up new growth opportunities in speciality chemicals.”

Sabic, which is 70 per cent owned by the Saudi government, is among the largest listed firms in the Middle East.

The company has been restructuring its business and expanding at home and abroad to develop its speciality chemical business. It plans to spend between $3bn and $10bn on acquisitions over the next five years in specialities and agri-nutrients, media reports earlier cited Mr Al Benyan as saying.

The chemicals industry is a key component of regional economies and the sector contributed to about $43.8bn to the GCC economy in 2016 alone, according to a November report from the Gulf Petrochemicals and Chemicals Association.

The growth – the fastest in five years – was driven by capacity additions from Saudi Arabia. The kingdom is targeting greater downstream integration and plans to build major refining and petrochemicals facilities to expand the range of value-added products.

Sabic in November signed an agreement with Saudi Aramco, the top global oil producer, to build one of the world’s largest oil-to-chemicals facilities, valued at $20bn, as Riyadh continues to diversify its economy away from reliance on crude revenues.

The integrated complex, to be located on the country’s western Red Sea coast, will process about 400,000 barrels per day of oil that would be turned into about 9 million tonnes of chemicals and base oils annually.

The facility is set to begin operations in 2025, Aramco said at the time.

Sabic and ExxonMobil last May agreed to conduct a detailed study for a joint petrochemical complex in Texas, with a potential capacity of 1.8 million tonnes of ethylene per year.

The Saudi firm also signed an agreement in 2017 with China’s Shenhua Ningxia Coal Industry Group to build a coal-to-petrochemicals complex in the East Asian country.