Clariant sells silicone business as it works to generate cash, restructure

September 01, 2009

Clariant has sold its specialty silicones business, including its Gainesville, FL facility, to SiVance LLC, an affiliate of New York-based GenNx360 Capital Partners, which targets business-to-business industrial companies. Terms were not disclosed, but the move generates cash for the Muttenz, Switzerland-headquartered company at a time when a drop in sales—they were offer 21% in the second quarter according to the earnings statement—has impacted cash flow.

On July 2, Clariant successfully placed a CHF 300 million ($283 million) senior unsecured Convertible Bond offering due 2014. The initial base deal size was CHF 225 million, but Clariant increased it in response to what it called strong investor demand for the offering, which it will use for short-term capital needs.

Clariant’s specialty silicones specializes in the use of silicone-based chemistry for the construction, personal care, pharmaceutical, and electronics markets. The business employs about 120 people, all of whom are expected to transfer to SiVance. Clariant originally acquired the business in 2000 when it purchased U.K.-based BTP.

In a release, Clariant’s North American region head, Ken Golder, said “We have decided to divest this business because its focus on developing complex but small-quantity silicone products is not closely aligned to Clariant’s business model and strategic direction.”
On July 30 in its second quarter earnings report, Clariant reported that operating income before exceptional items had fallen to CHF 69 million ($65 million) from CHF 143 million ($135 million), year over year, but was improved from a loss of CHF 13 million ($12 million) in the first quarter. Going forward, Clariant expects full-year 2009 sales to decrease 16-20% compared to 2008.

Given the circumstances, Clariant CEO Hariolf Kottmann said his company’s current focus remains “generating cash, decreasing costs, and reducing complexity….we are still challenged by unprecedented low demand and don’t expect a quick recovery. Hence, we are continuing with our efforts to reduce costs, generate cash, and simplify our operating structure in order to close the performance gap to our peers and gain further operational and strategic flexibility.”

The company already cut 1423 position, with an additional 500 job positions found redundant in 2009. Clariant says further reductions in 2009 and 2010 will follow as it works to “adjust the company’s structure to the global recession.” Effective Jan. 1, 2010, the company will remove what it calls its divisional management layer. In the future, its 10 business units will have full profit and loss responsibility including ownership of their assets. [email protected]

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