Solvay's plan to split into two separate public companies

Solvay announced today that it is reviewing plans to split the company into two separate public companies:

EssentialCo will include leading single technology businesses including Soda Ash and Derivatives, Peroxides, Silica and Consumer Chemicals, Performance Fabrics and Industrial Services, which are currently part of the company's Chemicals segment, and will also include Specialty Chemicals Business
.
These businesses generate net sales of around 4.
1 billion euros in 2021
.

SpecialtyCo will include the company's current Materials segment, including its high-growth, high-margin specialty polymers, high-performance composites, and most of the Solutions segment, including consumer and industrial specialty chemicals, technology solutions, fragrances and functionalities chemicals and oil and gas
.
Together, these businesses will generate net sales of around 6 billion euros in 2021
.

The benefits of splitting

When completed, the planned split will create two strong companies that will benefit from the strategic and financial flexibility to focus on their respective business models, markets and shareholder preferences
.
After the split, the two separate companies will work on:

▲ more focus on its strategy and growth opportunities;

▲ Concentrate resources to meet their unique business needs;

▲Adopt different operating modes to provide better service to customers;

▲ Pursue a differentiated capital structure and capital inclination goals;

▲Promote sustainable projects, including SpecialtyCo and EssentialCo to achieve carbon neutrality goals by 2040 and 2050 respectively;

▲Attract and retain the talent best suited for their respective businesses;

▲ Provide a clear investment theme and vision to attract a long-term investor base that suits each other
.

EssentialCo

EssentialCo will benefit from its strong leadership position by delivering proven essential technologies to numerous attractive and robust end markets including construction, consumer products, automotive
.

As a stand-alone company, EssentialCo will capitalize on expansion and integration opportunities to further strengthen its leadership, including accelerating the growth of its natural soda ash and sodium bicarbonate businesses, gaining business growth in Asia Pacific, and further expanding its leadership in peroxides, an integrated market status
.
The company will also accelerate its energy transition, starting with its soda ash business, to play a key role in achieving carbon neutrality by 2050
.
After the split, EssentialCo will strengthen its operating model by strengthening its cost leadership and maximizing cash generation
.

SpecialtyCo

As an independent company, SpecialtyCo will provide innovative value-added solutions to support a more sustainable world, which will generate above-market growth and strong returns
.
SpecialtyCo will consist of two business units:

1.
Materials

The Materials segment is focused on providing customers with new solutions to key performance and environmental challenges
.
The Materials segment has the broadest portfolio of unique proprietary materials based on high-performance polymer and carbon fiber composite technologies, and it holds global leadership positions in all core markets
.
The Materials segment has a proven track record of above-market growth, driven by underlying megatrends such as electrification, lightweighting, sustainable mobility and digitalization
.

The Materials segment will focus on innovation, strong commercial capabilities and a unique understanding of its customer base, positioning it to drive continued market penetration of its sustainable solutions to help customers achieve the best in their industries (transportation, electronics, healthcare).
Disruptive development
.
The segment will benefit from increased investment in production capacity, innovation and commercial capabilities to support above-market organic growth, superior returns and industry-leading margins
.

2.
Consumer chemicals and resources

The Consumer Chemicals & Resources segment is primarily composed of businesses currently within Solvay's Solutions segment, by anticipating rapidly changing customer needs
.

With a proven asset-light business model and underlying megatrends including eco-friendly ingredients and resource efficiency, the segment will leverage its portfolio of innovative solutions and application expertise to drive the consumer industry's shift towards bio-based, natural and circular solutions.
development
.
The division will be positioned to generate strong returns above market growth
.

Overview of the trading plan

Both companies will employ their own tailored capital structures that will best support their respective value creation goals
.
SpecialtyCo will strive to achieve a stable investment grade rating
.
When it spins off, it will have full financial flexibility to secure funding for growth plans
.
EssentialCo will inherit a prudent financial policy to ensure cash flow generation
.
Solvay SA will seek to maintain its existing investment grade rating until the split
.
Solvay SA is committed to offering current holders of US dollar and euro senior notes and hybrid notes the option to switch to SpecialtyCo in a timely manner
.
As planned, the initial dividend will be comparable to what Solvay is offering now
.

Under the split, Solvay shareholders will continue to hold their current Solvay shares, which will also continue to trade on Euronext Brussels and Paris
.
The spin-off will be achieved through a partial spin-off of Solvay, where the Specialty Chemicals business will be spun off into SpecialtyCo
.
Solvay shareholders will receive SpecialtyCo shares in proportion to their holdings in Solvay SA
.
Shares in both companies are scheduled to be traded on Euronext Brussels and Paris
.
The company plans to structure the split in a manner that is tax efficient for the vast majority of shareholders in key jurisdictions
.

The board members, management teams and names of both companies will be announced at a later date
.

The transaction will be subject to general market conditions and customary closing conditions, including final approval by Solvay's board of directors, approvals from specific financiers, and shareholders' decisions at an extraordinary general meeting
.
The transaction is scheduled to close in the second half of 2023
.
The board of Solvay's longtime major shareholder Solvac has confirmed its support for the Solvay deal
.

Solvay plans to report on the strategies of SpecialtyCo and EssentialCo to investors before the split is completed
.