DSM sells petrochemicals business to Sabic for Euro2.25bn

Author: Neil Sinclair


LONDON (CNI)--Dutch group DSM has agreed to sell its petrochemicals business to Saudi Basic Industries Corp (Sabic) for Euro2.25bn ($1.96bn).

Sabic and DSM said in statements on Wednesday that agreement had been reached in principle on a deal which, subject to regulatory approvals, is expected to be completed around 30 June this year.

The transaction, which will be retroactive from 1 January, involves the transfer of all shares of the companies that together form DSM Petrochemicals (DPC), the associated DPC participations and sales activities, and the related technology positions, patents and trade names.

Sabic, which is the largest petrochemicals producer in the Middle East, said half the agreed purchase price will be paid upon closing and the other half 4.5 years later.

DSM's petrochemicals business had sales last year of Euro2.4bn and sells about 2.6m tonne/year of polymers, mostly in Europe.

The deal, which has been under negotiation for many months, gives Sabic a foothold in Europe and represents a major advance in Sabic's declared policy of becoming a leading global player in petrochemicals with substantial manufacturing operations outside the Middle East. It said the deal will move it from 22nd position to 11th position in the global petrochemical industry, and will establish Sabic as the third and fourth global player in the polyethylene (PE) and polypropylene (PP) businesses respectively.

Mohamed Al-Mady, Sabic's vice-chairman and managing director, commented: "This is an exciting proposition for our company. The acquisition of DSM’s successful petrochemical business makes sound strategic and economic sense for Sabic. It will provide us with a strong entry position in the European market and a springboard for Sabic’s ambition to become a sector leader worldwide. The intended acquisition brings together experienced management teams, successful R&D (research and development) divisions and a group of skilled people unrivalled in the industry. This will be good news for our customers and suppliers, and provides security and growth opportunities for petrochemical manufacturing in Europe."

DSM, which put its petrochemicals business up for sale over a year ago, said the deal will enable it to develop into a specialty company focusing on advanced biotechnological and chemical products for the life science industry and performance materials.

Peter Elverding, DSM chairman, said: "This transaction fits in very well with our vision 2005 strategy. Sabic is a very strong and highly committed player in the petrochemicals business. Over the years, DSM Petrochemicals has made an excellent contribution to DSM’s performance and I am convinced that this transaction will secure its future."

The deal involves DSM Hydrocarbons, DSM Polyethylenes, DSM Polypropylenes (all in The Netherlands), DSM Polyolefine GmbH (DPO, Germany), DSM Hydrocarbons Americas and DSM Polypropylenes North America. In anticipation of the intended sale, these businesses were merged into one organisation on 1 January this year to form the DPC business group. In addition, the proposed sale includes DSM’s interests in DSM Transport Maatschappij (DTM Pipelines), the integrated pipeline grid in northwest Europe (ARG and PALL) and various DPC participations in China and Malaysia.

The proposed sale further includes all related technology positions and the activities of the Stamicarbon licensing department for DPC and dedicated activities of DSM’s support departments, such as the petrochemicals-related activities of DSM Research and DSM dedicated sales activities of DPC in Belgium, Denmark, France, Spain, Italy, Germany, the UK and Turkey, as well as DSM Sales International and the shared services.

About 2300 DSM employees will be transferred to Sabic. DPC employs 2060 people, of whom about 1530 are based in Geleen (Netherlands) and 530 in Gelsenkirchen (Germany). The dedicated DPC activities of other DSM units involve a total of about 220 people.

DSM said it will use the revenues from the sale of its petrochemicals business to make acquisitions in specialty chemicals, in line with the announcements made in 2000, when the company presented its vision 2005 strategy.