Clariant India, Colour-Chem Call Off Merger

The much-publicised proposed domestic merger of Hoechst AGs speciality chemicals subsidiary, Colour-Chem, with Clariant (India) Ltd has been called off.

The two companies will continue to operate as separate subsidiaries of Clariant AG. The pharmaceuticals giant came into being after the merger of Hoechst AGs global speciality chemicals business with Clariant International, an erstwhile division of Sandoz.

Colour-Chems German parent, Hoechst AG, will transfer its 50.1 per cent shareholding in Colour-Chem to Clariant AG on September 30. Colour-Chem will thereafter become a subsidiary of Clariant AG.

The decision to shelve the merger between Clariant and Colour-Chem comes at a time when all the high-profile pharma mergers of the last two years are stuck at different stages for different reasons.The domestic merger between Colour-Chem and Clariant was mooted last year after Hoechst AG announced its decision to sell its speciality chemicals division to the newly formed Clariant International, spun off from Sandoz after the drug company decided to merge with Ciba-Geigy.

The worldwide merger between Hoechst AGs speciality chemicals division and Clariant has already taken place. In fact, the two companies have combined their operations from July 1 this year. However, the proposed domestic merger had to be shelved, reportedly due to complications arising from the agreement between Colour-Chem and DyStar, the textile dyes joint venture between Hoechst AG and Bayer AG. DyStar India, formed as a 50:50 joint venture between Bayer AG and Hoechst AG, uses Colour-Chems manufacturing facilities for selling its textile dyes. The toll manufacturing agreement was signed last year and is valid from April 1, 1997.

According to the agreement, Colour-Chem will receive Rs 63 crore for the transfer of its textile dyes business to Dystar. However, Colour-Chem will continue to manufacture dyes for and on behalf of Dystar at its Thane and Roha plants. Clariant (India) also has a textile dyes business. Therefore, it would be placed in the awkward position of having to manufacture products for its competitor if the merger went through, pointed out sources.

Besides, Clariant wanted the textile dyes business for itself as it is keen to increase its market share in this highly profitable business. While Colour-Chems textile dyes business contributes around 20 per cent to its turnover, almost 50 per cent of Clariants turnover comes from textile dyes.