M&As: Sabic disposes of steel unit Hadeed to PIF for US$3 bn; Tredegar to sell Terphane flexible films biz to Oben for US$116 mn

M&As: Sabic disposes of steel unit Hadeed to PIF for US$3 bn

Saudi petrochemical major Sabic has agreed to sell its subsidiary Saudi Iron and Steel Company (Hadeed) to the Public Investment Fund (PIF) for an enterprise value of US$3.33 billion. The transaction is expected to close before the end of the first quarter of 2024, and proceeds from the sale will be used to support Sabic's growth in the chemicals industry, according to a company statement to the stock exchange.

The chemicals-maker has suffered amid a weakening global economy, reporting an 85% fall in profit in the second quarter, due to lower average sales prices and weaker demand. It said it wants to focus on core businesses as the rationale for the divestment.

The fair valuation of Hadeed's net assets is expected to result in a non-cash loss of between 2 to 2.5 billion riyals in Q3 earnings, according to Sabic.

As a top manufacturer of steel products, Hadeed has been a big player in the construction of Saudi Arabia's large infrastructure projects, which are key to its economic transformation plan known as Vision 2030, which the PIF, the kingdom's wealth fund, is spearheading.

In a press statement, PIF said: “Furthermore, the transactions will contribute towards the growth of key downstream sectors such as local construction, automotive, utilities, renewables, transport and logistics, in line with Saudi Vision 2030.”

Meanwhile in other news, US-based Tredegar Corporation announced that it has agreed to sell its flexible packaging films (Terphane) business to affiliates of Oben Group for net debt-free base consideration of US$116 million. Terphane, which solely comprises the flexible packaging segment reported by Tredegar, has approximately 500 employees with manufacturing sites located in Cabo de Santo Agostinho, Brazil and Bloomfield, New York, and headquarters located in São Paulo, Brazil, and exports to 29 countries.

Tredegar expects to realise after-tax cash proceeds from completion of the transaction of US$85 million after deducting projected Brazil withholding taxes, escrow funds, US capital gains taxes and transaction costs. Actual after-tax proceeds may differ from estimates due to possible changes in deductions during the potentially lengthy interim period (expected to be between 8 and 14 months) to the closing date.

For the 12 months ended June 30, 2023, net sales and EBITDA from ongoing operations for Terphane were US$152 million and US$16.4 million, respectively.

Closing of the transaction is contingent upon the satisfaction of customary conditions, including clearance by competition authorities in Brazil and Colombia.

Tredegar is an industrial manufacturer with three primary businesses: custom aluminIum extrusions for the North American building & construction, automotive and specialty end-use markets; surface protection films for high technology applications in the global electronics industry; and specialiSed polyester films primarily for the Latin American flexible packaging market. Tredegar had 2022 sales of us$939 million. With approximately 1,800 employees, Tredegar operates manufacturing facilities in North America, South America, and Asia.

Oben is a player in the market of inputs for the flexible packaging industry with more than 31 years of experience in the production of flexible films having strategic locations in more than 17 countries with sales to more than 40 countries in the Americas, Europe and Africa. It has a diversified portfolio that includes BOPP, BOPET, BOPA, BOPE, CPP, extrusion coated as well as thermoformed products.


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