2 Large Specialty Chemical Firms Agree to Merge

Clariant and Ciba Specialty Chemicals, the world’s largest makers of specialty chemicals, agreed to unite in a stock swap worth about $8.1 billion that would create the dominant company in the global $100-billion industry.

The new company, Clariant, would have annual sales of $13.3 billion and make products from colorants for Colgate toothpaste to dyes for the leather seats in Jaguar cars.

The transaction also unites two former chemicals units of Ciba-Geigy and Sandoz, which formed Novartis, the world’s No. 3 drug maker, in 1996.

The specialty chemicals industry has seen a flurry of mergers and acquisitions in the last two years as drug companies with chemicals units tried to focus on what they do best, while chemical makers tried to get rid of their less profitable bulk-chemicals businesses.

Clariant and Ciba Specialty, both based in Switzerland, said they plan to save more than $430 million by 2001 as they cut 3,000 jobs, or about 5% of the combined work force, to boost earnings as demand for chemicals falls.

The companies expect the union to add to earnings beginning in 2000, after taking a charge of about $573 million next year.

Both Clariant and Ciba have indicated earnings growth is slowing this year as falling demand in Asia and the U.S. depresses prices. Ciba has been shedding as many as 1,100 jobs this year to cut costs.

The new Clariant would be more than twice as large as its biggest competitor, Britain’s Imperial Chemical Industries, which had 1997 specialty chemicals sales of $5.96 billion.

Under the deal, Clariant shareholders will get 5.35 new shares for each share they hold, and Ciba holders will get one new share for each Ciba share. Clariant holders will have a 54% majority in the company.

Ciba’s American depositary receipts rose 50 cents to close at $51.25 in over-the-counter trading.