By Zarifa Huq
ZURICH | DUBAI
SAUDI GIANT SABIC BOWS OUT OF JV TALKS
Major joint venture talks between Swiss Clariant and majority shareholder Saudi Basic Industries (SABIC) has fallen through, providing yet another blow to the Swiss company after their CEO abruptly resigned this week. Clariant, a leading chemical company focusing on care chemicals, catalysis, natural resources, and plastics & coatings has a market share of $6.6 billion. In comparison, SABIC, one of the largest petrochemicals manufacturers has a market capitalization of $88 billion. An astounding 70% of its shares are owned by the Saudi Arabian government.
The deal for SABIC to join Clariant’s additives and specialty masterbatches businesses would have aided in cutting costs and raising profits to around $3.14 billion in annual sales. The fallout, due to a lack of agreement on pricing, has Clariant looking to sell both its specialty masterbatches business as well as its standard masterbatches. The direction of the company is moving towards a takeover target according to Baader Helvea chemicals analyst Markus Mayer. SABIC could be posed for a complete takeover, though no interest has been shown as of yet.
Though negotiations has been put on hold at this time, SABIC has stated that it, ‘looks forward to continuing the discussions with Clariant once conditions improve,” proving once again that they are cognizant of the global market and though wary of the price point, still interested in maintaining a line of communication. It remains to be seen whether new demands can be brought to the table. Can the parties create a more holistic package and drive the conversation away from a pricing issue or can another solution be provided in the future for negotiations to start again?
Read the full article from Reuters here.