Clariant, SABIC to deepen alliance as regulators back stake deal

ZURICH (Reuters) - Saudi Basic Industries Corp 2010.SE won regulatory approvals on Monday to buy a quarter of Swiss chemicals maker Clariant CLN.S, cementing a partnership they hope will drive profit.

A man walks past the headquarters of Saudi Basic Industries Corp (SABIC) in Riyadh, Saudi Arabia October 27, 2013. REUTERS/Faisal Al Nasser/File Photo

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 capitalize 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.

Reporting by John Miller; Editing by Sunil Nair/Kirsten Donovan/Alexander Smith