Clariant said on Thursday that joint venture talks with top shareholder Saudi Basic Industries (SABIC) had been shelved, a further setback for the Swiss chemicals maker whose CEO abruptly quit this week.
Shares in Clariant plunged 11 percent as the company also announced a first-half loss.
Clariant and SABIC, which has a 25 percent stake in the Swiss group, had been working to combine Clariant's additives and specialty masterbatches businesses - including colors, additives and special effect concentrates for plastics used for products such as packaging - with parts of SABIC's specialty chemicals operation.
Even before the JV flopped, Clariant had been in upheaval, announcing on Wednesday that CEO Ernesto Occhiello, who joined just 10 months ago, was resigning with immediate effect.
Clariant said it would now look to sell its specialty masterbatches business along with standard masterbatches that were already on the auction block.
"What a mess!" Baader Helvea chemicals analyst Markus Mayer said in a note, adding he sees Clariant increasingly as a takeover target.
"SABIC has an interest to fully take over Clariant. With the resignation of CEO Occhiello, who came from SABIC, and the termination of the JV negotiations, we think it is just a matter of time SABIC will come up with a takeover offer."
With a market capitalization of $88 billion, SABIC is 13 times bigger than $6.66 billion Clariant.
SABIC said it "looks forward to continuing the discussions with Clariant once conditions improve".
Saudi oil giant Aramco this year reached an agreement with the state-run Public Investment Fund to buy its controlling stake in SABIC for $69.1 billion.
Mazen al-Sudairi, head of research at Al Rajhi Capital, said market conditions might be a factor for the shelving of the JV, as petrochemical prices are down globally and have hurt sector results.
"Whenever there are any concerns or changes related to the economic cycle, M&A should be put on hold," he said, adding SABIC learned that lesson when its $8 billion acquisition of a unit of GE in 2007 was followed by the subprime mortgage crisis.
SABIC bought its stake in Clariant in 2018, arriving on the scene as a white knight to end the Swiss company's fight with activist investors who had previously blocked the Swiss company's proposed $20 billion merger with US-based Huntsman Corp.
Clariant on Thursday reported a first-half net loss of 101 million Swiss francs versus a profit of 211 million a year earlier. Sales were steady at 2.2 billion francs.
The results were affected by a 231 million franc provision Clariant set aside for an ongoing competition law investigation by the European Commission.
