Ciba sells textile unit to US firm

The unit produces colourful textile effects. Ciba SC

Basel-based Ciba Specialty Chemicals is to sell its ailing textile effects unit to the Huntsman Corporation of the United States for SFr332 million ($254 million).

Under the terms of the deal, made up of cash and assumed debt of SFr75 million, Huntsman will take over about 4,200 Ciba employees.

Ciba’s textile effects business, which produces dyes and other chemicals for the textile industry, has increasingly been struggling in the face of competition from cheaper Asian producers.

Rumours about the future of the business had circulated since August last year when Ciba said it was evaluating all options, including a sale.

In a statement on Monday, Ciba said the board of directors had taken the decision to sell the business after several months of intense evaluation during which several bids were considered.

“The textile business needs a different operational structure from that of our other three segments, as it has a broader, more regional customer base,” commented Ciba chairman and CEO Armin Meyer.

He added that the sale of the unit would allow Ciba to focus on its core businesses of plastic additives, coating effects, and water and paper treatment.

Relieved

One Zurich-based dealer told Reuters he was relieved Ciba had finally found a solution for the unit but added that he had expected a price of about SFr500 million.

“It’s been sold and that’s the main thing… There will be some relief that this has finally gone through… but I do not expect too much upside potential,” commented a second trader.

Employees representatives and the union Syna were disappointed with the news. The staff association of Ciba Switzerland described the planned sale as a “harsh blow”.

Meyer told journalists in a conference call that the company did not plan to make any further divestments in the next one to two years, nor did it plan any major acquisitions. He declined to give a 2006 profit forecast after the sale of the unit.

“We prefer to give guidance on the outlook for the company… with the first-quarter figures because we need to go through the impact of this,” he said.

Ciba said on Monday that it was taking an after-tax charge of about SFr250 million for the difference between the book value and the sale price, and an extra SFr100-200 million in additional costs after tax relating to the deal.

This includes up to SFr40 million to Huntsman for the costs of adapting the business after the deal.

swissinfo with agencies

Key facts

Ciba’s textile effects unit accounted for 17% of group sales in 2005 (SFr1.283 billion).
The unit employs 4,200 workers or 22% of Ciba’s staff.
About 1,100 people in Basel are affected by the planned sale.

In brief

Ciba SC was created in 1997 from the specialty chemicals operations of Ciba-Geigy when that company merged with Sandoz to form Novartis.

The group supplies dyes and pigments to the textile, car, cosmetic, plastics, paper and construction industries.

It posted a net loss of SFr256 million for 2005, after setting aside SFr583 million for restructuring its textiles unit.

This is Huntsman’s second acquisition of a Ciba unit. In 2003 it acquired the Vantico Group, which was formerly Ciba’s performance polymers division.