Clariant begins 2020 sale plan with search for pigments buyer

FRANKFURT/ZURICH (Reuters) - Switzerland's Clariant CLN.S has begun the sale of its pigments business as part of wider a streamlining which it has said it will complete by the end of 2020, sources said.

FILE PHOTO: A woman stands next to a logo of Swiss specialty chemicals company Clariant ahead of a news conference to present the company's full-year results, in Zurich, Switzerland, February 14, 2018. REUTERS/Moritz Hager

Saudi Arabia’s Saudi Basic Industries (SABIC) bought a 25 percent stake in Clariant last year, ending a dispute between the Swiss company and U.S.-based activist investor White Tale which scuttled a planned merger with U.S.-based Huntsman Corp.

Clariant has mandated Deutsche Bank DBKGn.DE to find a buyer for the pigments business, which could be valued at around 800 million Swiss Francs ($820 million), the sources told Reuters, adding that private equity firms were likely buyers.

Another source said the pigments business’s enterprise value could top 1.3 billion francs, with additional parts of the plastics and coatings unit that are up for disposal bringing total proceeds to between 1.5 billion and 1.6 billion francs when divestitures are completed by the end of 2020, as Clariant has targeted.

The pigments industry has suffered from price pressure as Asian firms have taken market share, although more stringent environmental rules in China and India give Clariant an edge.

The Swiss company is expected to send out information packages on the unit in the first quarter, aiming to sign a deal as early as before the summer break, they added.

Rivals such as BASF BASFn.DE, which has spun out its pigments business into a separate legal entity, are less likely to show any interest in the Clariant division, the sources said.

Clariant, which began carving out its plastics and coatings business for eventual disposal four years ago, and Deutsche Bank both declined to comment on Wednesday.

Clariant moved what was then a unit with 2.6 billion francs in annual sales, with products including plastic colorings, additives and pigments, into a separate subsidiary, sparking speculation about the company’s future.

In 2017, Clariant announced a planned merger with Huntsman, only to have this derailed by White Tale, whose owners instead suggested the Swiss firm consider selling off plastics and coatings and review all alternatives for the rest.

Clariant said White Tale, whose principals included hedge fund manager Keith Meister, wanted to break it up.

In September, Clariant announced it would combine activities like additives and higher-value specialty masterbatches with parts of SABIC’s specialty chemicals in a new joint venture called High Performance Materials.

That left Clariant’s remaining Plastics & Coatings activities including pigments, standard masterbatches and medical specialties, businesses with 2017 revenues of 1.56 billion Swiss francs, and earnings before interest, tax, depreciation and amortization of 182 million francs.

While pigments, with roughly 100 million to 150 million Swiss francs in core earnings, are first in line, the other two units are going to be put on the block at a later stage, the sources said.

Reporting by Arno Schuetze and John Miller; Editing by Michelle Martin