SABIC has signed two strategic transactions to divest its petrochemicals and regional engineering thermoplastics businesses to private equity firms for a total combined enterprise value of $950 million (€708,191,750) – sparking concerns about the outlook for Europe’s chemicals sector.
Both transactions will allow SABIC to maintain strategic access for its products to priority markets in Europe and the Americas. Alongside its buyers, SABIC expects to maintain business continuity.
SABIC’s European Petrochemicals business produces and markets polymers and value-added polymer compounds, including ethylene, propylene, low- and high-density polyethylene, and polypropylene.
It manages manufacturing sites in Teesside, United Kingdom; Geleen in the Netherlands; Gelsenkirchen, Germany; and Genk, Belgium.
The business will be divested to German asset management firm AEQUITA for an enterprise value of $500 million.
“This transaction represents a further step in the expansion of our European chemicals platform,” says AEQUITA president and co-CEO Dr.-Ing. Axel Geuer. “The assets are highly synergistic with the olefins and polyolefins business we recently acquired from LYB; with complementary markets, infrastructure and operational capabilities, we see substantial potential to realize synergies and drive operational improvements across both businesses.
“Under AEQUITA’s active ownership model, our focus will be on supporting the teams on the ground, ensuring a seamless integration, and building a scaled, competitive platform positioned for long-term, sustainable value creation.”
Meanwhile, the regional Engineering Thermoplastics business produces polycarbonate, polybutylene terephthalate (PBT), and acrylonitrile butadiene styrene (ABS) resin and compounds.
It manages manufacturing sites at Mt. Vernon, Ottawa, Bay St. Louis, and Burkville in the United States; Tampico, Mexico; Campinas, Brazil; Cartagena, Spain; and Bergen op Zoom, the Netherlands.
Business operations in Europe and the Americas will be sold to private equity investor MUTARES, based in Germany, for an enterprise value of $450 million. An agreed earn-out mechanism is hoped to generate further value to SABIC based on the business free clash flow generation over the next four years, and in the event that MUTARES sells the business in future.
“The Engineering Thermoplastics (ETP) business in the Americas and Europe has a highly skilled workforce and strong customer relationships,” said Robin Laik, co-founder and CEO of MUTARES. “Under focused ownership, our priority is to ensure continuity, support employees through the transition, and unlock the full potential of our asset base as a standalone ETP platform.”
According to SABIC, the divestments will increase its overall EBITDA margins, improve free cash flow generation, and support higher return on capital employed (ROBE). These developments are expected to help SABIC optimize capital and align its profitability aspirations with a value-accretive portfolio.
The transactions are expected to help advance its strategy and contribute to its broader portfolio organization programme. This is set to form a ‘strong foundation’ for future profitable growth and bolster the company’s long-term strategic positioning for maximum value add.
In turn, SABIC aims to improve returns and focus on high margin markets and products with clear competitive advantage. It also aspires to recycle capital to higher-return opportunities, improve free cash flow, and maximize shareholder value while maintaining its global market.
“These transactions represent a continuation of our Portfolio Optimization Program, which started in 2022 and included previous actions, such as the divestment of Functional Forms, Hadeed and Alba,” says Abdulrahman Al-Fageeh, CEO of SABIC.
“This strategic approach allows us to actively reshape our portfolio and sharpen our focus on areas where SABIC has clear and sustainable competitive advantages in a rapidly changing landscape.”
“These transactions are a clear demonstration of our disciplined approach and decisive execution regarding capital allocation and active portfolio management,” continues CFO Salah Al-Hareky. “By unlocking value to fund higher-return opportunities, we are improving the quality and efficiency of our capital employed and enhancing the group’s ROCE over time. Together, these actions position SABIC to deliver sustainable returns and create value for our shareholders.”
Chairman of the Board of Directors Khalid H. Al-Dabbagh added: “The Board endeavoured to achieve these transactions, which represent a significant milestone in the execution of our strategy to further optimize our portfolio and maximize shareholder value by enhancing the Company’s cash generation capacity and achieving the highest possible return on our global businesses.”
Some commentators have expressed scepticism. Chemploy chief Gijs van der Zanden considers the divestment is “a strategic exit, sold as progress”, observing that SABIC’s share price is falling towards its lowest level in seventeen years.
According to Reuters, SABIC’s shares fell by up to 4.8% at 48.2 riyals (€11.04) per share in early trade in Riyadh on Thursday, and its stock has lost 26.4% in the last 12 months.
“Officially, it’s called portfolio optimization,” van der Zanden writes. “In reality, it’s an industrial clearance, carried out with a press release as a moving box.
“The price is almost literary: $950 million for everything, $500 million of which is for the petrochemical core. For that amount, you can’t even pave an access gate in a modern refinery, let alone maintain a cracker or survive a permitting process.”
Kirill Kalinkin, managing director at FTI Consulting, considers the move “a very clear sign that the European chemicals sector is getting fundamentally troubled. Hands-on private equity firms known mostly for turnaround / restructuring investments in mid-sized industrial goods German companies [are] becoming the owners of massive chemicals asset operating across the globe.
“Will these assets be quietly sailing in shadow till their last days or thrive under the new entrepreneurial ownership? Time will tell.”
Completion of the transactions is subject to customary closing conditions and regulatory approvals, including employee consultation.
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