The Saudi Basic Industries Corporation (SABIC) has purchased a 25% stake in Clariant effectively ending the Swiss Chemical Group’s fight with activist investors.
US activist investors Keith Meister, David Winter and David Millstone announced that they had unloaded their stakes to SABIC after previously insisting they were long-term Clariant investors.
SABIC, the number four chemical firm in the world said it currently has no plans to launch a full takeover bid of Clariant. The move on the other hand fuelled uncertainty among investors and industry watchers regarding the Saudi’s intentions towards Clariant especially as the Kingdom strives to diversify its economy and minimize its reliance on oil.
Bank Vontobel analysts said in a note to investors that the story isn’t likely over yet. This step strategically makes sense for SABIC, the bank argues. Seventy percent of SABIC is owned by Saudi Arabia’s sovereign wealth fund, Public Investment Fund.
Last year, the American activist investors blocked Clariant’s $20 billion merger with US peer Huntsman, saying it undervalued the Swiss company and that it did not make sense strategically. Their demand for an independent strategic review and three seats on the board were snubbed by the Swiss company.
Based on market capitalization, SABIC’s stake is worth around $2.4 billion but the Saudi investors did not say how much they paid for it. Energy companies from the Middle East have been eager to expand into more advanced downstream chemical operations like the catalysts that Clariant produces to help speed up processes at chemical plants.
Saudi Aramco, a state-owned oil company recently bought half the synthetic rubber business of Germany’s Lanxess for around €1.2 billion.
Yousef Al-Benyan, CEO of SABIC said in a statement that Clariant AG is complementary to SABIC’s existing specialties business and is well in line with SABIC’s strategy of opening up new growth opportunities in specialty chemicals.
In November, Al-Benyan told Reuters that the chemical maker planned to spend around $3 to $10 billion on acquisitions and was looking at a couple of specialty plastics producers with operations in Europe, the Middle East and China.
Certain analysts do not anticipate SABIC to stop now. The company could try to convince the second biggest shareholder group, a family linked to Germany’s Sued-Chemie that Clariant bought in 2011, to sell.
Markus Mayer, a Baader Helvea analyst said that SABIC is not known to be satisfied with smaller stakes.