SABIC is said to weigh IPO of specialty chemicals business

Saudi Basic Industries Corp. (SABIC) is considering an initial public offering of its multibillion-dollar specialty chemicals unit, people familiar with the matter said.

SABIC is speaking with advisers as it weighs a potential listing of the business as early as 2021, the people said, asking not to be identified as the matter is private. Specialty chemicals, which SABIC recently carved out as a separate unit, generate about $2bn of annual revenue, the people said.

Deliberations are at an early stage, and there’s no certainty they will lead to a transaction, the people said. Representatives for SABIC and its largest shareholder, Saudi Aramco, declined to comment.

While SABIC hasn’t decided on a venue for the potential share sale, a local listing would help Saudi Arabia deepen its stock market at a time when the country has been opening up more to foreign investors. Any deal could also help SABIC raise funds after the company said in May it’s suspending new capital expenditures to protect its balance sheet.

SABIC reported its biggest quarterly loss in at least a decade in the three months through June. It returned to profit in the third quarter, thanks mainly to the reversal of impairments associated with its Clariant AG stake, though revenue for the period fell 11 per cent.

The company has no current plans to borrow and will focus on “liabilities and capex and managing costs” over the next year, SABIC chief executive officer Yousef Al-Benyan said in a Bloomberg TV interview last month.

Capacity Expansion
Specialty chemicals have been a focus of SABIC’s growth strategy in recent years. SABIC said previously that it was on track to set up the division as a standalone business by November 1. It’s also boosting production capacity for some specialty chemicals, with the expansion slated to become operational in the Netherlands next year and in 2022 in Singapore, according to an October statement.

In 2018, SABIC acquired a stake in Swiss chemicals group Clariant to expand into higher-margin products used in cosmetics, catalysts and biofuel. In the summer of 2019, a planned $3.1bn specialty-plastics venture between the two companies fell apart amid a sharp downturn in the global chemicals market.

Clariant management and the Saudi company have since been unable to agree on how to deepen their bond, Bloomberg News has reported. Still, SABIC this year raised its stake in Clariant to 31.5 per cent.

SABIC is majority owned by Aramco, which bought a 70 per cent stake in the company from the Gulf kingdom’s sovereign wealth fund for $69bn this year. The deal was part of the state energy firm’s plan to diversify from oil into higher-value chemicals.