Clariant and SABIC suspend JV negotiations

SPECIALTY chemical company Clariant and diversified petrochemicals company SABIC have “temporarily” suspended negotiations for a high-performance materials joint-venture (JV), due to “unfavourable market conditions”. The announcement followed just one day after Clariant announced the resignation of CEO Ernesto Occhiello.

In September 2018, Clariant and SABIC signed a memorandum of understanding for a JV that would consist of Clariant’s Additives and high value Masterbatches businesses, and parts of SABIC’s Specialties business. The JV, High Performance Materials, was to provide highly customer-specific, high performance materials and solutions. Reuters reports that the JV was expected to generate CHF3.1bn (US$3.2bn) in annual sales.

Clariant was to have the majority stake in the JV.

According to Reuters, in the current market it is difficult for Clariant and SABIC to agree on a price for SABIC’s assets. Clariant Chief Financial Officer Patrick Jany reportedly said that SABIC would likely receive less than expected, and Clariant would probably pay too much. The companies agreed that a suspension was in both their interests.

The JV was part of a planned portfolio upgrade which Clariant announced in September 2018. According to Reuters, Clariant will now “rework” the strategic plan as it can no longer rely on the JV to boost its growth.

Clariant’s upgrade plans included divestment of the company’s remaining Plastics and Coatings business – consisting of Pigments, standard Masterbatches, and Medical Specialties – by 2020. While Clariant intends to proceed with the divestment as planned, it will now divest its entire Masterbatches business, ie standard and high value Masterbatches. Clariant’s Masterbatches is a global leader in colour and additive concentrates and performance solutions for plastics.

Clariant now intends to focus on its core business areas, Care Chemicals, Catalysis and Natural Resources and it will invest the divestment proceeds into innovations and applications within those areas.

For SABIC, the JV was part of a long-term growth and diversification strategy. To prepare the business to participate in “further organic and inorganic growth,” including the JV, SABIC was to establish certain parts of its Specialties business as a standalone business. SABIC’s Specialties business comprises its ULTEM and NORYL resins and its family of LNP compounds and co-polymers.

Following the recent announcement SABIC said that it “looks forward to continuing these discussions once conditions have improved as we remain committed to our strategic growth ambitions in the area of specialties”. The company added that the decision would not impact its Specialties business or its “ongoing customer commitments”.

On 24 July, the day before the suspension of negotiations was announced, Clariant announced that its CEO Ernesto Occhiello had resigned “with immediate effect,” due to “personal reasons”. Occhiello became CEO in October 2018. Hariolf Kottman, Executive Chairman of Clariant’s Board of Directors, will assume Occhiello’s responsibilities until a successor is found.

Last year, SABIC become Clariant’s largest stakeholder after acquiring a 24.99% stake in the company. The purchase closed in September 2018.