SABIC to acquire DSM's petrochemicals business

The transaction involves the transfer of all shares of the companies that together form DSM Petrochemicals (DPC), the associated DPC participations and sales activities, and the related technology positions, patents and trade names. After the closing, the transaction will take retroactive effect from 1 January 2002. DSM and SABIC expect the closing to take place around 30 June 2002 .

The total consideration of the transaction is EUR 2.250 billion; half of this amount will be paid upon closing and the other half 4.5 years after the closing. As from the closing, DSM will account for the net revenue of the sale based on its Net Present Value.

DSM has asked the Works Councils involved to give their advice on this proposed transaction in accordance with legal requirements. Where required the trade unions have also been informed. The transaction requires the approval of the European Commission and may also have to be notified to competition authorities outside the European Union.

DSM was supported in the transaction process by Credit Suisse First Boston. SABIC was advised by JP Morgan Chase.

Strategy
Through this acquisition, SABIC is taking a major step forward in the implementation of its strategy, which is aimed at becoming a leading global player in petrochemicals. This acquisition will move SABIC from 22nd position to 11th position in the global petrochemical industry, and will establish SABIC as the third and fourth global player in the polyethylene and polypropylene businesses respectively.

Mr Mohamed H. Al-Mady, Vice-Chairman and Managing Director of SABIC's Board of Directors, gave the following comment: "This is an exciting proposition for our company. The acquisition of DSM's successful petrochemical business makes sound strategic and economic sense for SABIC. It will provide us with a strong entry position in the European market and a springboard for SABIC's ambition to become a sector leader worldwide. The intended acquisition brings together experienced management teams, successful R&D divisions and a group of skilled people unrivalled in the industry. This will be good news for our customers and suppliers, and provides security and growth opportunities for petrochemical manufacturing in Europe."

By selling its petrochemicals business DSM realizes a major element of its strategy, formulated at the end of 2000, of developing into a specialist company focusing on advanced biotechnological and chemical products for the life science industry and performance materials (Vision 2005: Focus and Value). Commenting on the proposed agreement, Mr. Peter Elverding, Chairman of DSM's Managing Board of Directors, said: "This transaction fits in very well with our Vision 2005 strategy. SABIC is a very strong and highly committed player in the petrochemicals business. Over the years, DSM Petrochemicals has made an excellent contribution to DSM's performance and I am convinced that this transaction will secure its future. DSM will now concentrate on further implementing Vision 2005: Focus and Value."

DSM Petrochemicals
In 2001 DSM Petrochemicals generated sales of EUR 2.4 billion. It annually sells about 2.6 million tonnes of polymers, mainly in Europe.

The proposed sale of DSM's petrochemical activities to SABIC specifically concerns DSM Hydrocarbons B.V., DSM Polyethylenes B.V., DSM Polypropylenes B.V. (all in the Netherlands), DSM Polyolefine GmbH (DPO, Germany), and DSM Hydrocarbons Americas Inc and DSM Polypropylenes North America Inc in the United States. In anticipation of the intended sale, these businesses were merged into one organization on 1 January 2001 to form the business group DSM Petrochemicals (DPC). In addition, the proposed sale includes DSM's interests in DSM Transport Maatschappij (DTM Pipelines), the integrated pipeline grid in Northwestern Europe (ARG and PALL) and various DPC participations in China and Malaysia. The proposed sale further includes all related technology positions and the activities of the Stamicarbon licensing department for DPC and dedicated activities of DSM's support departments, such as the petrochemicals-related activities of DSM Research and DSM dedicated sales activities of DPC in Belgium, Denmark, France, Spain, Italy, Germany, the UK and Turkey, as well as DSM Sales International and the shared services.

Employees and Site relations
In total about 2,300 DSM employees will be transferred to SABIC. DPC employs 2,060 people, of whom about 1,530 are based in Geleen (Netherlands) and 530 in Gelsenkirchen (Germany). The dedicated DPC activities of other DSM units involve a total of about 220 people.

The DPC employees based in Geleen (Netherlands) will be transferred by law to a new company, De Petrochemicals Limburg B.V. The Collective Labour Agreement of DSM Limburg B.V., their current formal employer, will remain in force for them throughout its duration (until 1 April 2003), except for a few provisions that directly relate to DSM N.V., such as the annual profit sharing scheme and the employee option scheme. In consultation with the trade unions, proper alternatives for these schemes will be sought.

At the Gelsenkirchen (Germany) site, the formal employer and legal entity DSM Polyolefine GmbH (DPO) will continue to exist as such; the shares in this company will be transferred to SABIC.

The transaction will not lead to any changes in the terms of employment in force. The same holds for the transfer to SABIC of DSM employees who are not currently employed within DPC or DPO.

This deal will lead to a strong partnership between DSM and SABIC. At the Geleen (Netherlands) site specifically the partners will have mutual interdependencies regarding the supply of feedstocks and products and the provision of services and utilities.