Clariant CEO leaves as Sabic deal suspended
Clariant and Sabic have agreed to temporarily suspend the discussions on combining the former’s Additives business and the high value part of the Masterbatches business and parts of the latter’s Specialties business into a single ‘High Performance Materials’ business area. The decision was made due to unfavourable market conditions and because they could not agree on the value of the businesses Clariant would bring to the venture, the two companies said. After the announcement, Clariant’s share price fell by 10%.
Saudi petrochemicals giant Sabic acquired a 24.99% stake in Clariant from ‘activist shareholder’ White Tale as part of a move into specialities and the two formulated plans for this combination shortly after. It was White Tale that had prevented Clariant’s attempted merger with Huntsman. In September 2018, the Pigments business was dropped from the venture.
Clariant confirmed that it will continue with the divestment of Pigments and will also divest the entire Masterbatches business by the end of 2020. These make up its Plastics & Coatings business area, which accounts for about half of sales. It plans to use the proceeds to invest in its core businesses, strengthen its balance sheet and return capital to shareholders. Talks will be resumed when conditions are more favourable, Clariant added. However, some analysts have said there is little rationale left in the venture if the Masterbatches business is sold separately.
On the day before, Clariant CEO Ernesto Occhiello had resigned “for personal reasons with immediate effect” after only nine months in the role. To what extent this was linked to the problems with the Sabic deal is unclear. Occhiello was formerly with Sabic and there has been speculation that there was friction between the German-Swiss and Italian parts of the business.
However, former CEO and chairman of the board Hariolf Kottman, who has taken over the reins again until a suitable replacement can be found, denied this, saying that Occhiello’s resignation had been sealed before the decision was taken to call off the joint venture. Kottmann is now heading the executive committee, alongside CFO Patrick Jany and COO Hans Bohnen.
In 1H 2019, sales from continuing operations grew by 4% in local currency terms to CHF 2,229 million, thanks to higher volumes and pricing. EBITDA before exceptional items for continuing operations fell by 2% to CHF 355 million but by 70% when one-off costs of CHF 231 million for an EU investigation into an alleged ethylene purchasing cartel. Kottmann described the half-year as “admittedly challenging”, especially Q2. T
he strongest business areas were Catalysis and Natural Resources, other than Additives, which saw sales decline due to the softer consumer electronics and automotive markets. Masterbatches and Pigments units were 2% down, “negatively impacted by the weakened economic environment”. Care Chemicals had sales of CHF 850 million Swiss francs, with EBITDA before exceptionals of CHF 154 million.
Separately, Clariant has sold its Healthcare Packaging business to a newly-formed affiliate of Arsenal Capital Partners, a private equity firm, for about CHF 308 million. Closing is expected to take place in Q4, subject to customary conditions and approvals. The business had sales of about CHF 135 million in 2018, has facilities in the US, France, China and India, and employs around 600.