70% chance of Swiss Clariant takeover in the next 24 months - analyst

25 January 2018 13:28 Source:ICIS News

LONDON (ICIS)--Expectations for a takeover of Clariant have been upgraded to over 70% by some chemical analysts after Thursday’s news that Saudi petrochemical major SABIC had acquired a 24.99% stake in the Swiss chemicals producer, thus becoming its biggest shareholder.

On 16 January, Baader Bank said that the chances of a takeover or a break-up of Clariant in the next 24 months was approximately 50%. Baader has placed a 12-month target price forecast at Swfr32.00 ($33.68).

Clariant's shares were however losing more than 6% on Thursday, to Swfr26.61.

However, a stipulation regarding the collapsed merger between Clariant and US firm Huntsman means the Swiss firm would be liable to pay the latter $60m if it was to sell more than 35% of its portfolio to a third party before April 2019.

SABIC bought the Clariant shares from 40 North and Corvex Management through financing from foreign banks, the Saudi producer said in a filing to the Saudi Stock Exchange, or Tadawul, on Thursday.

The cost of the acquisition was not disclosed.

However, based on Clariant’s market capitalisation value of Swfr8.61bn, a 24.99% share would be valued at Swfr2.15bn.

The sellers are represented by White Tale Holdings, an activist investor at Clariant, which opposed the Swiss firm’s proposed merger with Huntsman.

In December, CEO Hariolf Kottman said Clariant was aiming to improve its share price, hoping that would convince White Tale to sell its stake and did not rule out the possibility of a "white knight" emerging to fend off the investment group.

“The transaction is part of [SABIC’s] strategy to achieve its strategic objectives in diversifying its products and providing innovative solutions to its customers,” SABIC said, citing that Clariant has 80 factories with a total chemicals production capacity of 4m tonnes/year.

“It should be noted that the purchase amount [paid for the stake at Clariant] does not exceed 10% of SABIC's net assets according to the latest audited financial statements,” it said, adding that the financial impact of the acquisition would be reflected on SABIC first-quarter results.

A spokesperson for Clariant told ICIS that the company intends to engage in talks with SABIC along the same vein as the talks it held with White Tale, the objectives of which are long-term value creation for all shareholders.

The spokesperson added that due to the fact the share transaction is between SABIC and White Tale, “it’s not our place to provide tonnes of additional comments".

In a separate statement issued on Thursday, Clariant said it “intends to engage with SABIC over the coming weeks in order to discuss the new situation and explore possible ways" to create value for its shareholders.

In late October 2017, White Tale’s acquisition of more than a 20% stake in the Swiss company thwarted the merger-of-equals planned by Huntsman and Clariant.

David Winter, Co-CEO of Standard Industries and Co-CIO of 40 North, said on Thursday: “SABIC is an established global leader in the chemicals industry with a world-class management team and a long-term, sophisticated vision for the future. We are confident that this transaction allows Clariant AG to continue its path to becoming a global specialty chemicals leader.”

The analyst at Baader Bank Markus Mayer said SABIC might be interested in Clariant’s catalyst business, as the Saudi major continues its push to enter more downstream sectors.

“When Sud-Chemie was sold in 2011, SABIC was among the bidders in the last rounds, according to our information. Therefore, we think that SABIC might be in particularly interested in the catalyst part of Clariant. As the catalyst business has just started its recovery, the timing of a takeover makes sense, in our view," said Mayer.

($1 = Swfr0.95)

(update adds detail throughout)

Pictured: A sign outside a Clariant facility in Louiseville, Kentucky, US
Source: Sipa USA/REX/Shutterstock

Additional reporting by Pearl Bantillo

By Niall Swan