Solvay plans to split into 2 independent companies

Solvay announced that it is reviewing plans to separate the company into two independent publicly traded companies:

Ø  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. 

Ø  SpecialtyCo would comprise the Solvay’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 in net sales in 2021.

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: intensify focus on its strategy and growth opportunities; prioritise resources to meet its unique business needs; apply differentiated operating models to better serve its customers; pursue distinct capital structures and capital allocation priorities; drive sustainability initiatives, including reaching carbon neutrality before 2040 for SpecialtyCo, and before 2050 for EssentialCo; attract and retain talent best suited for distinct businesses; and provide a clear investment thesis and visibility to attract a long-term investor base suited to each company.

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.

Under the separation plan, Solvay’s shareholders would retain their current shares of Solvay stock, which will continue to be listed on Euronext Brussels and Euronext Paris.  The separation would be effected by means of a partial demerger of Solvay whereby the specialty businesses will be spun off to SpecialtyCo. Solvay shareholders at the time of separation would receive shares in SpecialtyCo pro rata to their shareholding in Solvay SA. The shares of each company would be expected to be listed on Euronext Brussels and Euronext Paris. The company expects to structure the separation in a manner that would be tax efficient for a significant majority of shareholders in key jurisdictions.

The composition of the Boards and management teams, as well as naming for each company, will be provided at a later date.

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.