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.


Foreign investment in Bahrain rising sharply, authorities say

Updated 46 min 57 sec ago
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Foreign investment in Bahrain rising sharply, authorities say

DUBAI: New foreign direct investment in Bahrain more than doubled in the first nine months of 2018 as the kingdom marketed itself as a base for companies to access the region, especially Saudi Arabia, data released on Tuesday showed.
Investment commitments between January and September jumped 138 percent from a year ago to a record $810 million from 76 firms, said the Economic Development Board, an investment promotion agency. That compared to $733 million in all of 2017, and was over five times the amount of FDI in 2015.
The rise in FDI is good news for Bahrain’s balance of payments, which has been under pressure as the kingdom runs fiscal and current account deficits fueled by low oil prices.
The central bank’s net foreign reserves hit a one-year low of 499.4 million dinars ($1.32 billion) in July, although they rebounded to 734.2 million dinars last month.
Manufacturing and logistics accounted for most foreign investment in the first nine months of this year, the EDB said. Some companies are locating operations in Bahrain to take advantage of reforms in Saudi Arabia, which aims to develop non-oil industries such as mining, light manufacturing and tourism.
Bahrain also wants to become a center for financial technology; last year it created a “regulatory sandbox” allowing companies in the field to experiment without facing normal regulatory constraints.
This year it established a $100 million fund of funds to support technology start-ups across the region, which it hopes will attract venture capital firms to Bahrain.