SABIC to acquire DSM's petrochemicals business for almost $2 billion
By OGJ editors
HOUSTON, April. 3 -- Saudi Arabia Basic Industries Corp, (SABIC), Riyadh, has reached an agreement in principle with Geleen, Netherlands-based DSM BV to purchase DSM's petrochemicals business for 2.25 billion euros ($1.98 billion).
In 2001 DSM Petrochemicals generated sales of 2.4 billion euros. It annually sells about 2.6 million tonnes of polymers, mainly in Europe.
In anticipation of the intended sale, four DSM chemical businesses in the Netherlands and two in the US were merged into one organization Jan. 1, 2001, to form the business group DSM Petrochemicals (DPC).
The transaction involves transfer of all shares of companies that form DPC, the associated DPC participations and sales activities, and all related technology, patents, and trade names.
Half of the agreed-upon purchase price will be paid upon closing and the other half 4.5 years after closing, expected to take place June 30, 2002, although ownership would be retroactive from Jan. 1. From the closing date, DSM will account for the net revenue of the sale based on its net present value.
SABIC strategy
Following the acquisition, SABIC, already the largest petrochemicals producer in the Middle East, will move from 22nd to 11th largest in the global petrochemicals industry and will become the third and fourth largest global player in the polyethylene and polypropylene businesses, respectively.
Mohamed H. Al-Mady, vice-chairman and managing director of SABIC's board of directors, said: "The acquisition of DSM's successful petrochemical business . . . will provide us with a strong entry position in the European market and a springboard for SABIC's ambition to become a sector leader worldwide."
The Saudi government owns 70% of SABIC shares. Private investors in Saudi Arabia and other countries of the Gulf Cooperation Council hold the remaining 30%. SABIC's business activities are organized into five industry groups: basic chemicals, polymers, intermediates, fertilizers, and metals. In 2001, SABIC's overall petrochemical production capacity amounted to 35 million tonnes/year.
About 2,300 DSM employees will be transferred to SABIC, which said the transaction would not lead to any changes in the terms of employment already in force. DPC employees in Geleen will become employees of a new company, De Petrochemicals Limburg BV, and employees at DSM's Gelsenkirchen, Germany, site will continue to be associated with DSM Polyolefine GmbH (DPO), whose shares will be transferred to SABIC.
SABIC said the deal will lead to a strong partnership between itself and DSM. At DPC's Geleen site, for example, the partners will have mutual interdependencies regarding the supply of feedstocks and products and the provision of services and utilities.
DSM strategy
By selling its petrochemicals business, DSM will better focus on advanced biotechnological and chemical products for the life sciences industry and performance materials.
DSM will use revenues from the sale as a cash infusion for a subsidiary company, DSM Vision 2005 BV, and to make acquisitions in specialty chemicals in line with its corporate strategy, outlined in 2000.
The transaction requires the approval of the European Commission and possibly notification to competition authorities outside the European Union.
