Saudi Basic Industries Corporation (Sabic), the Middle East's biggest petrochemicals producer, has agreed to buy a 24.99 per cent stake in Clariant, becoming the largest shareholder of the Switzerland-based specialty chemicals company.
Sabic is acquiring approximately 83 million shares in Clariant from 40 North and Corvex Management, the firm said in a statement on Thursday without saying how much it is paying for the deal. Reuters estimated the transaction value at US$2.4 billion based on Clariant's market capitalisation.
The purchase amount does not exceed 10 per cent of Sabic's net assets and the deal will be financed through foreign banks, the company said in a separate statement to the Saudi Stock Exchange, where its shares are traded. It did not name the lenders. The financial impact of the transaction will be reflected in Sabic's first quarter results this year.
The company currently has no plans to launch or otherwise effect a full takeover of Clariant and the closure of the transaction is subject to regulatory approval, it said.
"This acquisition is part of Sabic's long-term growth strategy to remain committed to product differentiation," said Yousef Al Benyan, Sabic's vice chairman and chief executive officer. "Clariant is complementary to Sabic's existing specialties business and is well in line with Sabic's strategy of opening up new growth opportunities in specialty chemicals."
Sabic, which is 70 per cent owned by the Saudi government, is among the largest listed firms in the Middle East. The company has been restructuring its business and expanding at home and abroad to develop its speciality chemical business. The company plans to spend between $3bn and $10bn on acquisitions over the next five years in specialties and agri-nutrients, media reports earlier cited Mr Al Benyan as saying.
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The chemicals industry is a key component of regional economies and the sector contributed to around $43.8bn to the GCC economy in 2016 alone, according to a November report from the Gulf Petrochemicals and Chemicals Association . The growth - the fastest in five years - was driven by capacity additions from Saudi Arabia. The kingdom is targeting greater downstream integration and plans to build major refining and petrochemicals facilities to expand the range of value-added products.
Sabic in November signed an agreement with Saudi Aramco, the top global oil producer, to build one of the world’s largest oil-to-chemicals facilities, valued at $20bn, as Riyadh continues to diversify its economy away from reliance on crude revenues.
The integrated complex, to be located on the country's western Red Sea coast, will process around 400,000 barrels per day of oil that would be turned into around 9 million tonnes of chemicals and base oils annually. The facility is set to begin operations in 2025, Aramco said at the time.
Sabic and ExxonMobil in May last year agreed to conduct a detailed study for a joint petrochemical complex in Texas, with a potential capacity of 1.8 million tonnes of ethylene per year. The Saudi firm also signed an agreement in 2017 with China's Shenhua Ningxia Coal Industry Group to build a coal-to-petrochemicals complex in the east Asian country.
