Clariant's Planned Sabic Tie Up Falls Victim to Chemicals Slump

(Bloomberg) -- Clariant AG suspended a planned $3.1 billion specialty-plastics venture with anchor investor Saudi Basic Industries Corp., falling victim to a sharp downturn in the global chemicals market that threatens to sabotage its transformation into a higher-margin company.

The stock dropped as much as 10.6%, the most since Jan. 2018. The announcement came a day after the sudden departure of Chief Executive Officer Ernesto Occhiello, a well-regarded industry veteran whose resignation was officially attributed to “personal reasons.” Clariant Chairman Hariolf Kottmann, who will resume Occhiello’s duty’s for the time being, said in a telephone interview the two companies struggled to agree on how much their respective businesses were worth, and that talks may resume once market conditions stabilize.

“You need to find a compromise, if you don’t it’s better to take a bit of time,” Clariant Chief Financial Officer Patrick Jany said in on the same call. “We’ve been looking at it in detail and just came to this point given the current market and business development.”

The two surprise announcements threaten to thrust Clariant back into more tumultuous times from which the Swiss chemicals specialist had sought to emerge. Sabic’s purchase last year of a 24.99% stake was seen as a stabilizing factor after upheaval from activist-investor pressure and a failed combination with U.S. rival Huntsman Corp. For its part, Sabic sought to move into higher-value products with the help of its Swiss partner.

Both Clariant executives declined to elaborate on the CEO departure, saying only that the relationship was “solid” and “collegial.” Sabic and Clariant’s planned plastics and additives tie up would have had about 3.05 billion francs ($3.1 billion) in sales and offer savings in raw materials as well as possible plant mergers. Sabic was to contribute operations making polymers used in car-engine equipment as well as 5G telecom infrastructure. Clariant would have brought color pigments and other additives for materials.

A sharp downturn in the car industry has hurt production and dented demand for plastics and chemicals, leading to a spate of profit warnings at companies including BASF SE. Clariant will continue with a plan to sell its pigments business, as well as a masterbatches unit that adds color and other enhancements to plastics, it said in a statement.

Clariant reported earnings before interest, taxes, depreciation and amortization of 355 million francs ($360 million), down 2% from a year earlier. It booked a 231 million-franc charge related to an ongoing probe by antitrust investigators in Europe.

To contact the reporter on this story: Andrew Noël in London at anoel@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Benedikt Kammel, Tara Patel

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