M&As: SIIG and Petrochem in talks on merger; Apollo considering EUR8 bn takeover of Covestro

Saudi Arabian petrochemicals companies Saudi Industrial Investment Group (SIIG) and the National Petrochemical Company (Petrochem) are in discussions over a potential merger. The companies say their boards have approved initial discussions between the companies to study the “economic feasibility” of a possible merger. No agreement has been reached on the final structure of any merged business, the companies add.

SIIG owns 50% of Petrochem but the two companies are similar in size, suggesting a deal would be a merger of near equals.

The two companies previously held merger discussions in 2011, with those talks eventually postponed to allow Petrochem’s petchem facility at Jubail to reach production capacity and provide better valuations of the companies, SIIG said at the time.

SIIG was established in 1996 and Petrochem was formed in 2008.

The two companies had combined assets of US$9.5 billion as of June, Refinitiv data shows. SIIG had total assets of US$5.12 billion at the end of June while Petrochem’s market capitalisation is US$3.7 billion and it has a larger market value than SIIG.

A deal would mark further consolidation in the Saudi petrochemicals sector after oil giant Saudi Aramco bought a 70% stake in Saudi Basic Industries (Sabic) this year while Saudi International Petrochemical Co. (Sipchem) acquired Sahara Petrochemical Co last year.

Meanwhile, in other news, US private equity firm Apollo Global Management Inc, led by billionaire Leon Black, is exploring a takeover of German plastics maker Covestro, according to Bloomberg News. The talks are at an early stage and there is no certainty they will result in a deal, according to the report.

Covestro, formerly Bayer Material Science, was spun off from the Bayer Group in 2015 and raised EUR1.5 billion from the IPO that valued it at some EUR4.9 billion. While its shares have climbed 68% since then, they have been cut by more than half in price from a high in early 2018, giving it a market value of EUR8.2 billion.

Covestro recently said it expects to beat analyst EBITDA estimates for Q3, at EUR350 million, up from EUR125 million in Q2. It believes results will enjoy a boost from the need for stay-at-home workers to upgrade mobile devices and furniture.

The firm is a market leader in polyurethanes and polycarbonates. It also has a sizable specialty chemicals business that is focused on coatings and adhesives.

(PRA)

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