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Sabic: strategy in place for greater global role

Sabic: strategy in place for greater global role



Sabic gets world boost

The taking over of DSM's petrochemicals unit can be considered as one of Sabic's most important moves, guaranteeing it high slots in market segments and enhanced world prestige

March - April 2002

Sabic, already the Middle East's largest petrochemicals producer is poised to become the 11th biggest player in the field following an agreement it reached in principle to purchase DSM's petrochemicals business.

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, expected to take place around June 30, 2002, the transaction will take retroactive effect from 1 January 2002, a Sabic statement said.

The total consideration of the transaction is Euro 2.250 billion.

In 2001 DSM Petrochemicals generated sales of Euro 2.4 billion. It annually sells about 2.6 million tonnes of polymers, mainly in Europe.

Sabic earned a net profit of $475.2 million in 2001. Sales exceeded $7.71 billion, an increase of 9 percent on 2000 with 27.4 million tonnes of product marketed, a rise of 28 percent on the year. Meanwhile, total production reached 35.4 million tonnes, a 26 percent rise over 2000.

"Through this acquisition, Sabic is taking a major step forward in the implementation of its strategy, which is aimed at becoming a leading global player in petrochemicals," said the statement. "This acquisition will move Sabic from 22nd position to 11th position in the global petrochemical industry, and will establish it as the third and fourth global player in the polyethylene and polypropylene businesses respectively."

Mohamed H. Al Mady, Sabic vice-chairman and managing director, remarked: "This is an exciting proposition for our company. The acquisition of DSM's successful petrochemical business makes sound strategic and economic sense. It will provide us with a strong entry position in the European market and a springboard for its ambition to become a sector leader worldwide.

"The intended acquisition brings together experienced management teams, successful R&D divisions and a group of skilled people unrivalled in the industry. This will be good news for our customers and suppliers, and provides security and growth opportunities for petrochemical manufacturing in Europe."

Commenting on the proposed agreement, Peter Elverding, chairman of DSM's managing board of directors, said: "This transaction fits in very well with our Vision 2005 strategy. Sabic is a very strong and highly committed player in the petrochemicals business. Over the years, DSM Petrochemicals has made an excellent contribution to DSM's performance and I am convinced that this transaction will secure its future. DSM will now concentrate on further implementing Vision 2005: Focus and Value."

The proposed sale of DSM's petrochemical activities to Sabic specifically concerns DSM Hydrocarbons B.V., DSM Polyethylenes B.V., DSM Polypropylenes B.V. (all in the Netherlands), DSM Polyolefine GmbH (DPO, Germany), and DSM Hydrocarbons Americas Inc and DSM Polypropylenes North America Inc in the United States.

In anticipation of the intended sale, these businesses were merged on 1 January 2001 to form the business group DSM Petrochemicals (DPC). In addition, the proposed sale includes DSM's interests in DSM Transport Maatschappij (DTM Pipelines), the integrated pipeline grid in Northwestern Europe (ARG and PALL) and various DPC participations in China and Malaysia.

The proposed sale further includes all related technology positions and the activities of the Stamicarbon licensing department for DPC and dedicated activities of DSM's support departments, such as the petrochemicals-related activities of DSM Research and DSM dedicated sales activities of DPC Ñ in Belgium, Denmark, France, Spain, Italy, Germany, the UK and Turkey, as well as DSM Sales International and the shared services.

DSM is active worldwide in life science products, performance materials and industrial chemicals. The group has annual sales of Euro 8 billion and employs about 22,000 people.

The Saudi Arabian government owns 70 per cent of Sabic with the remaining 30 per cent held by private investors in Saudi Arabia and other countries of the Gulf Cooperation Council.

Earlier this year, Sabic announced it had signed an agreement with Technip Company of Italy for designing and building an acetic acid plant based on Sabic's new acetic technology developed at its R&D facilities in Riyadh. The plant is the first of its kind to be based on the oxidisation of ethane, which is supplied by Saudi Aramco.

Al Mady said the new plant would be built in Sabic's Arabian Industrial Fibers Company Complex (Ibn Rushd) in the Industrial City of Yanbu.

It is anticipated that the plant will come on stream by the beginning of the second quarter of 2004, with an annual production capacity 30,000 tonnes per year. PTA is used for the production of polyesters.

The chief executive of Eni, Vittorio Mincato, meanwhile, confirmed recently that Italy's biggest energy group was aiming to reach a deal to sell a petrochemical unit, Polimeri Europa, to Sabic.

He declined to give any details, saying the talks were proceeding.

Mincato had said earlier that Eni was in "advanced talks" to sell its 51 per cent stake in Polimeri Europa, an olefins and polyethylene producer

The unit had turnover of 1.8 billion euros in 2000.

"All our pain is coming from petrochemicals," Mincato said, referring to 332 million euros in operating losses incurred by the petrochemical division of the group in 2001 after a 4 million euros operating profit in 2000.

Eni attributed the fall to a 14 per cent contraction in refining margins, a six per cent drop in the volume of sales during last year and the effect of lower prices on inventories

The chief executive of Eni, Vittorio Mincato, meanwhile, confirmed recently that Italy's biggest energy group was aiming to reach a deal to sell a petrochemical unit, Polimeri Europa, to Sabic.

He declined to give any details, saying the talks were proceeding. Mincato had said earlier that Eni was in "advanced talks" to sell its 51 per cent stake in Polimeri Europa, an olefins and polyethylene producer

The unit had turnover of 1.8 billion euros in 2000.

"All our pain is coming from petrochemicals," Mincato said, referring to 332 million euros in operating losses incurred by the petrochemical division of the group in 2001 after a 4 million euros operating profit in 2000.

Eni attributed the fall to a 14 per cent contraction in refining margins, a six per cent drop in the volume of sales during last year and the effect of lower prices on inventories

Sabic's business activities have been organised into Strategic Business Units (SBU), which have been clustered in five industry groups: basic chemicals, polymers, intermediates, fertilisers and metals.

The company has two large industrial sites in Saudi Arabia (Al Jubail and Yanbu), with 16 world-scale 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.




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