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. Last Updated: 07/27/2016

Swiss Merger to Form Chemical Giant

BASEL, Switzerland -- Ciba Specialty Chemicals AG and Clariant announced Monday they would merge to form a chemicals giant with a yearly turnover of 18 billion Swiss francs ($13 billion).

The merger between the two Swiss based firms, worth 20.1 billion francs ($14.5 billion), will produce the world's biggest company making specialty chemicals and dyes.

Some 3,000 jobs of the total 55,000 worldwide will be lost in the process. It is hoped to save about 600 million francs ($444 million) per year through rationalization, a statement said.

The merger will take the form of a share swap. Ciba shareholders will receive 46 percent of the shares and Clariant shareholders 54 percent.

The new company will be called Clariant. Its logo will be the butterfly which was Ciba's trademark.

The new company president will be Rolf Schweizer, current Clariant president. The vice president and chief executive officer will be Rolf Meyer, the Ciba Specialty Chemicals president.

The decision to go ahead with the merger came just six weeks after the two companies' chairmen held their first talks on the subject, Schweizer said Monday at a news conference.

The deal comes amid a consolidation in the specialty chemicals sector, and financial markets have been awash with speculation that the two crosstown rivals would have to act boldly to flourish in an extremely competitive environment.

Clariant was spun off from Sandoz AG in 1996 before Sandoz and Ciba-Geigy merged into life sciences giant Novartis. Novartis spun off Ciba last year.

After the merger, the new Clariant will set medium-term targets of a 20 percent margin for earnings before interest, taxes, depreciation and amortization; net sales divided by average invested capital of 1.4; and sales growth of 1.5 times the rate of global economic growth.

The companies said they would have a strong platform for growth in the core businesses of additives and water treatment, cellulose ethers, process chemicals, fine chemicals and colors.

The new Clariant will spend around 650 million francs a year on research and development.

Germany's Hoechst will retain its current 45 percent stake in Clariant until the transaction is finished. "On completion, the participation of Hoechst in the new company will proportionally decrease," the companies said.

Clariant shareholders will receive 5.35 registered shares on the new company for each 50-franc-par share they now own. Ciba shareholders get one new share for each current share worth 10 francs par. Both companies will convene extraordinary shareholder meetings in the first quarter of 1999 to vote on the deal.

Ciba and Clariant said they expect to take a restructuring charge of 800 million Swiss francs for the planned merger.

They also said they planned separate dividend payments in 1999 on 1998 results, with the new Clariant's first joint dividend payment coming in 2000 on 1999 results.

Ciba and Clariant said the merger will probably be completed in the second half of next year. The merger is subject to approval from regulatory authorities.

Swiss approval is expected in January, said Patrick Ducrey, the deputy head of Switzerland's competition commission.