Solvay announces it is reviewing plans to separate the Company into two independent publicly traded companies, EssentialCo and SpecialtyCo.
"The plan to separate into two leading companies represents a pivotal moment in our journey to transform and simplify Solvay,” says Ilham Kadri, Solvay CEO.
Two Independent Companies
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EssentialCo would comprise leading mono-technology businesses including soda ash, peroxides, silica and coatis, which are reported as the Company’s chemicals segment, as well as the special chem business. These businesses generated approximately €4.1 bn in net sales in 2021.
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SpecialtyCo would comprise the Company’s currently reported materials segment, including its high-growth, high-margin specialty polymers, its high-performance Composites business, as well as the majority of its solutions segment, including Novecare, technology solutions, aroma performance, and oil & gas. These businesses combined generated approximately 6.0 bn euros in net sales in 2021.
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Our successful focus on cash, costs, and returns has strengthened the Materials and Solutions segments to be more self-sustaining and profitable. At the same time, the Chemicals segment has continued its strong track record of resilient cash generation.” "Our talented and dedicated employees have worked hard to transform Solvay, and their efforts have enabled us to take this important next step towards the creation of two strong companies,” added Kadri.
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Today's news is an important milestone for Solvay. In the last decade, Solvay has undergone major evolutions and the transformation has accelerated under Ilham’s leadership with a focus on profitable growth and simplifying the Company, all while driving innovation and raising the bar in sustainability,” says Nicolas Boël, chairman of Solvay board of directors.
Boël further added, “
This exciting announcement marks the next phase of the transformation. On behalf of the entire Board, we look forward to guiding Solvay’s next chapter of sustainable value creation for shareholders, customers, and employees."
Benefits of Separation
Upon completion, the separation would establish two strong industry leaders that would benefit from the strategic and financial flexibility to focus on their distinctive business models, market, and stakeholder priorities. Following the separation, each standalone company would be positioned to:
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Intensify focus on its strategy and growth opportunities
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Prioritize resources to meet its unique business needs
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Apply differentiated operating models to better serve its customers
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Pursue distinct capital structures and capital allocation priorities
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Drive sustainability initiatives, including reaching carbon neutrality before 2040 for SpecialtyCo, and before 2050 for EssentialCo
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Attract and retain talent best suited for distinct businesses and
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Provide a clear investment thesis and visibility to attract a long-term investor base suited to each company
EssentialCo to Provide Technologies for Various Markets
EssentialCo would provide technologies that have proven essential across a number of attractive and resilient end markets (including automotive, building, consumer goods) and benefit from a foundation of strong leadership positions.
As an independent company, EssentialCo would be positioned to further reinforce its leadership through expansion and consolidation opportunities, including accelerating growth in natural soda ash and sodium bicarbonate, pursuing growth in the Asia-Pacific region and further extending its leadership in a consolidating peroxide market.
It would also play a key role in accelerating the energy transition that began in its soda ash business in order to be carbon neutral before 2050. Following the separation, EssentialCo would strengthen its operating model by enhancing its cost leadership and maximizing cash generation.
SpecialtyCo to Comprise Two Business Segments
As an independent company, SpecialtyCo would provide innovative, value-added solutions that support a more sustainable world, driving above market growth and strong returns. SpecialtyCo would be comprised of two business segments:
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Materials: The Materials segment is an industry leader in advanced materials, focused on bringing new solutions to customers that address critical performance and environmental challenges. With a focus on innovation, a robust commercial engine, and unique understanding of its customer base, Materials would be positioned to drive continued penetration of its sustainable solutions to help customers disrupt their industries (transportation, electronics, healthcare).
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Consumer & Resources: The Consumer & Resources segment primarily consists of businesses within Solvay’s current Solutions segment and would be a market leader in providing specialty ingredients focused on more natural and sustainable solutions by anticipating rapidly evolving customer needs. The segment would be positioned to drive above market growth at strong returns.
Tailored Capital Structure
Each company would have a tailored capital structure that best supports its value creation objectives. SpecialtyCo would be committed to a strong investment-grade rating. The company would have full financial flexibility at the time of separation to fund its growth plan.
EssentialCo would maintain a prudent financial policy to support cash generation. The current investment grade rating of Solvay SA is intended to be preserved until the separation. Solvay SA is committed to offer current USD and EUR senior and hybrid bondholders the option to be transferred to SpecialtyCo in due time. The dividend at the outset is intended to be aligned with Solvay’s current level.
The transaction is subject to general market conditions and customary closing conditions, including final approval by Solvay’s board of directors, consent of certain financing providers and shareholder approval at an extraordinary general meeting, and is expected to be completed in the second half of 2023. The board of directors of Solvac, Solvay’s long-standing reference shareholder, has confirmed its support of Solvay’s transaction.
Solvay envisages updating investors on the strategies for SpecialtyCo and EssentialCo prior to the completion of the separation.
Morgan Stanley and BNP Paribas are serving as financial advisors for the transaction, with Cleary Gottlieb Steen & Hamilton and Linklaters acting as legal advisors.
Solvay's Complete Product Range
Source: Solvay