Sabic is buying Huntsman's European base chemicals and polymers business for $700m (€550m) in cash.
Sabic said that the acquisition,which was announced last Thursday, will boost its European sales by approximately €2.5bn ($3.2bn).
The company's sales for 2006 are expected to rise to around €6bn. The transaction is expected to close by the end of 2006.
Sabic will acquire the majority of Huntsman's UK-based petrochemicals plants, including the 865,000 tonnes/year naphtha cracker at Wilton, in the north east of England.
A 400,000 tonnes/year low density polyethylene (LDPE) plant is being built at the Wilton site, where the cracker also produces 400,000 tonnes/year of propylene and 1.3m tonnes/year of aromatics.
"The deal demonstrates our commitment into growing the Sabic business and the success of our globalisation strategy," Sabic chief executive Mohamed Al-Mady said.
Sabic said that it would invest to complete the LDPE plant that is under construction.
Huntsman chief executive, Peter Huntsman, said: "This is a major step in divesting our commodity businesses as we execute our previously announced strategy of aligning our portfolio to differentiated business and paying down debt".
The transaction would reduce Huntsman's UK pension liabilities by about $126m, enhancing the value of the deal, he added.
Huntsman wants to increase the focus on its differentiated chemicals portfolio, and wants to divest its North American base chemicals businesses.
Peter Huntsman said his company was in discussions with many industry parties to divest the businesses.
An announcement on that sale could be made before the end of the year, he added.
The company's titanium dioxide plants in the UK are not part of the Sabic deal.
The transaction also does not include Huntsman's Teeside-based pigments division or the Wilton-based aniline and nitrobenzene operations of its polyurethanes division.
Huntsman said the business being sold made earnings before interest, tax, depreciation and amortisation, of $176m in 2005.
Sabic became a major European petrochemicals players when it bought DSM's petrochemicals business for €2.25bn in April 2002.
The company had intended to add ethylene capacity at Geleen, Netherlands to fuel further downstream polymers expansion, but this year admitted that the costs of the project had become prohibitive.
The current investments in the UK coincided with Sabic's plans for growth, according to Al-Mady.
2006 IS LOOKING GOOD
Boy Litjens, Sabic Europe's chief executive, said that 2006 looked set to be a good year for the European petrochemical industry.
Speaking at the EPCA meeting in Monte Carlo last week, Litjens, who is also EPCA president, said: "The second half of 2006 could be even better than the first half," adding that this was expected to continue into 2007 and partly into 2008.
For the rest of the year, the industry was set to benefit from the recent decline in oil and naphtha prices.
Although analysts have predicted a downturn in the industry two years from now, Litjens was cautiously optimistic that the impact on the industry would not be as severe as had been previously predicted.
He said: "We should be careful about saying too explicitly that 2008 will be the year of the downturn. It's all related to the utilisation rates of our facilities and the development of demand and supply."
World ethylene demand was expected to increase by 4% a year, while in Europe it was forecast to rise by 3-3.5% in the next five years.
"We don't see major capacity increases, certainly not in Europe in the coming years. The bigger capacity increases are in the Middle East," he said but added that planned projects could face delays and possible cancellations, particularly in Iran.
"From experience we know that capacity expansions that have been announced for Iran are normally delayed," he said.
"I believe that some of the capacity expansions will be postponed and will possibly not go on," he added.
Litjens said a lot of restructuring has taken place in the industry in Europe, and that this must continue to improve competitiveness.
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