Dutch chemicals and materials group DSM and the Saudi Arabian Basic Industries Corporation (SABIC), the largest petrochemicals producer in the Middle East, have reached an agreement in principle on the purchase of DSM's petrochemicals business by SABIC.
The transaction involves the transfer of all shares of the companies that together form DSM Petrochemicals (DPC), the associated DPC participations and sales activities and the related technology positions, patents and trade names. After the closing, the transaction will take retroactive effect from January 1, 2002. DSM and SABIC expect the closing to take place by June-end 2002.
The total consideration of the transaction is €2.25 billion ($1.98 billion)—half of which amount will be paid upon closing and the other half 4.5 years after the closing. As from the closing, DSM will account for the net revenue of the sale based on its net present value. DSM was supported in the transaction process by Credit Suisse First Boston, while SABIC was advised by JP Morgan Chase.
The transaction requires the approval of the European Commission and may also have to be notified to competition authorities outside the European Union. DSM has asked the Works Councils involved to give their advice on this proposed transaction in accordance with legal requirements. Where required the trade unions have also been informed, according to a company press release.
Through this acquisition, SABIC is taking another step towards its professed goal of becoming a leading global player in petrochemicals. This acquisition will move SABIC from 22nd position to 11th position in the global petrochemical industry, and will establish SABIC as the third and fourth global player in the polyethylene and polypropylene businesses respectively. ”The acquisition of DSM's successful petrochemical business will provide us with a strong entry position in the European market,” commented Mohamed Al-Mady, vice-chairman and managing director of SABIC's board of directors.
The sale of its petrochemicals business fits DSM’s 2005 strategy of developing into a specialist company focusing on advanced biotechnological and chemical products for the life science industry and performance materials. In 2001 DSM Petrochemicals generated sales of €2.4 billion. It annually sells about 2.6 million tons of polymers, mainly in Europe. In anticipation of the intended sale, DSM businesses in the Netherlands, Germany and the US were merged into one organization on January 1, 2001 to form the business group DSM Petrochemicals (DPC). The sale also includes other DSM interests in plans in Northwestern Europe, China and Malaysia.
In total about 2,300 DSM employees will be transferred to SABIC. DPC employs 2,060 people, of whom about 1,530 are based in the Netherlands and 530 in Germany. The dedicated DPC activities of other DSM units involve a total of about 220 people.
DSM is active worldwide in life science products, performance materials and industrial chemicals. The group has annual sales of eight billion euros and employs about 22,000 people at more than 100 sites worldwide. The company's Vision 2005 strategy is aimed at generating sales of approximately €10 billion in 2005. At least 80 percent of these sales should be generated by specialties, i.e. advanced chemical and biotechnological products for the life science industry and performance materials. DSM will use the revenues from the sale of its petrochemicals business to make acquisitions in specialist chemicals.
The Middle East's largest petrochemicals company SABIC is based in Riyadh, Saudi Arabia. It was founded in 1976, when the Saudi Arabian government decided to use the hydrocarbon gases released in the production of oil as raw materials for the production of chemicals and polymers.
The Saudi Arabian government owns 70 percent of the SABIC shares. The remaining 30 percent are held by private investors in Saudi Arabia and other countries of the Gulf Cooperation Council (GCC). SABIC's business activities have been organized into Strategic Business Units (SBU), which have been clustered in five Industry Groups: Basic Chemicals, Polymers, Intermediates, Fertilizers and Metals.
SABIC has two large industrial sites in Saudi Arabia—Al-Jubail and Yanbu—with sixteen production complexes. Some of these production complexes are operated with multi-national partners, such as Exxon Mobil, Shell, Fortum, Ecofuel/ENI and Mitsubishi Chemicals. In addition, SABIC has interests in three production complexes in Bahrain. In 2001 SABIC's overall production capacity amounted to 35 million mtpa.
SABIC employs about 14,500 people worldwide, most of whom are based in Saudi Arabia. In 2001 SABIC posted sales of approximately 29 billion Saudi riyals (€8.9 billion) and a net profit of SR1.8 billion (€550 million). — (menareport.com)
© 2002 Mena Report (www.menareport.com)
