SABIC reshapes petrochemicals portfolio in US$950M sale

SABIC is divesting its European Petrochemicals (EP) business to investment group Aequita and its Engineering Thermoplastics (ETP) business in the Americas and Europe to private equity firm Mutares. The combined enterprise value totals US$950 million. 

SABIC says the divestments form part of its ongoing portfolio optimization program, launched in 2022, aimed at enhancing performance by increasing overall EBITDA margins, improving free cash flow generation, and supporting higher return on capital employed (ROCE). The company says this approach allows it to improve capital allocation and align profitability ambitions with a more value-accretive portfolio. 

The transactions are said to allow SABIC to maintain product access to Europe and the Americas, while sharpening its focus on higher-margin markets and products where it has clear competitive advantages. SABIC adds that its global leadership in research, advanced technology, and innovation will be maintained to support customer service and long-term growth. 

Chairman of the board of directors at SABIC, Khalid H. Al-Dabbagh, says: “The board endeavored to achieve these transactions, which represent a 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.”

Abdulrahman Al-Fageeh, SABIC’s CEO, says: “These transactions allow 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.”

Improving returns

SABIC is selling its EP business to Aequita for an enterprise value of US$500 million and its regional ETP business in the Americas and Europe to Mutares for US$450 million. The ETP transaction includes an earn-out mechanism linked to future free cash flow performance.

The EP business comprises petrochemical production assets and operations across several European countries, while the ETP business includes engineering thermoplastics production and compounding facilities serving customers across North America, Latin America, and Europe.

The petrochemicals manufacturer says the divestments establish a “strong foundation for future profitable growth” and “reinforce the company’s long-term strategic positioning for maximum value add.” The moves also follow previous divestments under SABIC’s portfolio optimization program.

Maintaining standards

Additionally, SABIC says the transactions do not impact its technology and innovation focus or its commitment to customers.

SABIC, alongside the buyers, will reportedly maintain business continuity, customer service, and high standards of safety, reliability, and compliance throughout the transition. 

The company says it is committed to ensuring a seamless separation, minimizing disruption to ongoing operations, and preserving strong relationships with all stakeholders, including customers and employees.

Completion of the transactions is subject to customary closing conditions and regulatory approvals, including employee consultation processes where applicable.

Salah Al-Hareky, chief financial officer at SABIC, says: “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.”