SABIC, Clariant high performance materials tie-up first step to takeover – Baader

18 September 2018 16:51 Source:ICIS News

LONDON (ICIS)--The formation of a new high performance materials unit between Switzerland-based producer Clariant and shareholder SABIC is the latest step towards the Saudi petrochemicals major fully acquiring the firm, with a takeover likely within two years, analysts at Baader Bank said on Tuesday.

The new unit, which combines Clariant’s additives and masterbatches businesses with SABIC’s specialties operations, is the most significant collaboration between the companies since the Saudi firm announced its intention to acquire a 24.99% stake in the company.

Prior to that, the Swiss firm had White Tail and other activist investors as shareholders.

The high performance materials deal, of which Clariant will be majority stakeholder, helps to position the Swiss company as the key takeover target among European chemicals firms, according to Baader Bank.

The company also announced on Tuesday that current CEO Hariolf Kottmann is to become chairman of Clariant’s board of directors and be replaced by SABIC specialties division executive vice president Ernesto Occhiello, effective 16 October.

“Today’s announcement is in our view 'the first wedding gift' for the bride Clariant,” said the investment bank.

SABIC could be set to increase its stake in the company through the capital funding Clariant may need to finance its part of the deal, it added.

The merged unit could stand to increase company earnings before interest, taxes, depreciation and amortisation (EBITDA) by double digits compared to earlier analyst consensus for the 2019 and beyond.

However, the deal could require some kind of capital funding increase for Clariant to refinance the integration of SABIC’s specialties business; this could help SABIC increase its stake in the company to around 30%, according to the bank.

Further takeover or acquisition activity could make SABIC continue to ratchet up its stake in the company, prior to a full takeover.

“Following steps might be a larger (US) takeover by Clariant (like WR Grace), with a capital raise which is fully underwritten by SABIC and therefore Clariant could be used as an merger and acquisition (M&A) vehicle before SABIC takes over Clariant fully,” the bank said.

SABIC itself may be an investment target for domestic oil and gas major Saudi Aramco, which in July announced it was considering the acquisition of a stake in the business.

Following Thursday's announcements, Clariant shares shot up nearly 8% to Swiss francs (Swfr) 25.93 ($26.95).

Baader Bank kept its 'Buy' recommendation on the company's stock, with a 12-month share price target forecast of Swfr33.50.

(Swfr1 = $1.04)

By Tom Brown