Investors applauded the move, sending Clariant shares up as much as 8.1 percent, the most in almost 16 months
Clariant AG moved into the orbit of its largest investor, Saudi Basic Industries Corp, which installed one of its managers as chief executive officer of the Swiss chemicals maker and gained four seats on the board.
Ernesto Occhiello, a Sabic executive who came from Dow Chemical Co., will take the helm on Oct. 16, as outgoing CEO Hariolf Kottmann moves to become chairman.
Muttenz, Switzerland-based Clariant also announced a merger of assets with Sabic to create a stronger plastics business.
Investors applauded the move, sending Clariant shares up as much as 8.1 percent, the most in almost 16 months.
The changes could bring some stability to Clariant, which was the subject of recurring takeover speculation during the past decade that culminated in a failed merger with Huntsman Corp. and an attempt last year by an activist investor to break up the company.
Instead, Sabic swooped in and bought a 25 percent holding.
“Clariant’s shares have lacked real momentum since the Huntsman deal was called off but today’s announcement gives the shares the convincing equity story they need,” said Barclays analyst Alex Stewart.
The two makers of specialty chemicals have been locked in talks on how to leverage their relationship. Riyadh-based Sabic acquired General Electric Co.’s plastics division for $11.6 billion a decade ago, with the operations now fitting with Clariant’s masterbatches and plastic compounding assets.
While Sabic is free to increase its stake and even orchestrate a full takeover of the company, the petrochemical maker reiterated today it currently has no intention of doing so.
The two companies “will now seek to further develop this strategic relationship at the highest levels,” Sabic CEO Yousef Al-Benyan said in a separate release.
“With this, we create stability and continue as an independent company,” Kottmann said on a call with reporters. Clariant’s specialty chemicals operations are an “important building block for Sabic’s strategy.”
The Swiss company expanded its board to 12 members, giving Sabic four seats. For its part, Sabic is set to be absorbed by Saudi Aramco.
The state-owned oil giant’s initial public offering has been put on hold as it focuses on buying a majority stake in the chemical maker for as much as $70 billion. Listing Aramco had been a centrepiece of the country’s reform program to diversify the economy away from oil.
Kottmann said he “doesn’t see any kind of uncertainty” hanging over Clariant going forward.
Sabic will contribute specialty chemical assets with 1.9 billion francs ($2 billion) in sales to Clariant’s additives operations to create a new venture for high performance materials, according to a presentation.
Sabic’s assets have similar profitability, yet are larger in size than those of Clariant so will result in a payment to the Saudi company, Chief Financial Officer Patrick Jany said on the call.
The business will focus on areas like robotics, aerospace and electronics, while the remainder of Clariant’s plastics and coatings division will be divested. Annual savings from the materials assets combination will be around 100 million francs, Kottmann said.
By 2021, the materials division’s turnover should increase to 4 billion francs, with an earnings before interest, taxes, depreciation and amortization margin of 24 percent to 25 percent.
Clariant shares were trading 7 percent higher at 25.72 francs as of 9:34 a.m. in Zurich.
Clariant was formed in 1995 when Sandoz spun off its chemical operation as part of a merger that created drugs giant Novartis.
When Kottmann became chief executive officer in 2008, he inherited an under-sized chemical maker that had been forced to sell valuable businesses. To rebuild the company, he acquired catalyst producer Sued Chemie in 2011, a business that Sabic also coveted.