SABIC and Clariant to deepen alliance as regulators back stake deal

A man walks past the headquarters of Saudi Basic Industries Corp (SABIC) in Riyadh. (Reuters)
Updated 10 September 2018
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SABIC and Clariant to deepen alliance as regulators back stake deal

  • Deal rescues Clariant from hostile takeover
  • SABIC to become biggest shareholder in Swiss firm

ZURICH: Saudi Basic Industries Corp won regulatory approvals on Monday to buy a quarter of Swiss chemicals maker Clariant, cementing a partnership they hope will drive profit.
The world's fourth-largest chemicals maker said in January it was buying a 24.99 percent stake from activist investors, rescuing Clariant from a hostile takeover threat.
However, gaining a regulatory nod from countries including Mexico and Brazil has pushed back closure of SABIC's stock purchase by nine months.
But with this roadblock now cleared, Clariant Chief Executive Hariolf Kottmann plans a strategic update to tell shareholders how the combination will work.
SABIC sees Clariant as a stepping stone to diversifying its portfolio, which relies on commodity chemicals like fertilizers and polymers. Kottmann meanwhile aims to capitalise on opportunities in SABIC's 50-plus country network, to not only boost sales but reap savings on raw materials costs.
When the transaction closes on Thursday, SABIC will become Clariant's biggest shareholder, ahead of a German family group that has held about 14 percent since selling holdings in Bavarian-based Sued-Chemie in 2011.
The size and reach of the Saudis -- SABIC has $40 billion annual sales, six times Clariant's revenue -- could help the Swiss company lower costs for materials for its products, which include fire retardants which are dropped to tackle forest blazes and catalysts to speed up chemical reactions.
"On the sourcing side, Clariant could really benefit," Zuercher Kantonalbank analyst Philipp Gamper said. "With its extensive business connections it will also open up sales opportunities."
Clariant shares were up 1.3 percent at 1100 GMT. They have fallen 12.7 percent this year, as the arrival of SABIC as an anchor shareholder dented hopes of a takeover or break-up.
SABIC shares, which have risen by about 17 percent this year, were down 1 percent.
While SABIC has said it has no plans to buy a majority holding, its deepening union with Clariant has prompted speculation that managers in Riyadh will eventually assert more control. Sources have said no move is imminent, although SABIC is unlikely to just sit on its 25 percent holding.
SABIC has long been a Clariant customer and the two have a plant design joint venture called Scientific Design, which generates shared revenue of about $80 million annually.
Yousef Al-Benyan, SABIC's CEO said the companies knew each other and had worked well together for many years.
"This investment is in line with SABIC’s strategy of product diversification...and becoming a global leader in the specialties sector," he said.


Shareholders of India’s Jet Airways approve debt-for-equity swap

Updated 23 February 2019
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Shareholders of India’s Jet Airways approve debt-for-equity swap

  • The plan will mean the lenders will have a bigger holding than any other shareholder
  • Currently, Chairman Naresh Goyal owns a 51 percent stake in the company and Abu Dhabi’s Etihad Airways owns 24 percent

MUMBAI: India’s Jet Airways said late on Friday that its shareholders approved a plan to convert existing debt to equity, paving the way for the troubled company’s lenders to infuse funds and nominate directors to its board.
Jet’s board last week approved a plan by lenders, led by State Bank of India, for an equity infusion, debt restructuring and the sale or sale-and-lease-back of aircraft.
The plan will mean the lenders will have a bigger holding than any other shareholder.
Currently, Chairman Naresh Goyal owns a 51 percent stake in the company and Abu Dhabi’s Etihad Airways owns 24 percent.
Jet, which had net debt of 72.99 billion rupees ($1.03 billion) as of end-December, has debt payments looming next month, according to rating agency ICRA. It has been unable to pay pilots’ salaries and has outstanding bills to aircraft lessors.
The company, India’s biggest full-service carrier, is struggling with competition from budget rivals, high oil prices and a weaker rupee. The share price took a beating in 2018, losing nearly 70 percent of its value.
In a regulatory filing, Jet said on Friday that 98 percent of its shareholders voted to increase the share capital to 22 billion rupees ($309.8 million) from 2 billion rupees at a special meeting.
Jet, whose financial woes are set against the backdrop of wider aviation industry problems, has been in the red for four straight quarters.