Why Did The 159-year-old Chemical Giant Split Up?

On the long-term path to achieve carbon peaking and carbon neutrality, global chemical companies are facing the most profound transformation challenges and opportunities, and have launched strategic transformation and reorganization plans.

In the latest example, the 159-year-old Belgian chemical giant Solvay announced that it would split into two separate public companies.

Why split

Solvay has made a series of radical shifts in recent years, from selling its pharmaceutical business to merging Rhodia to create the new Solvay, to acquiring Cytec. This year has ushered in the latest transformation plan.

On March 15, Solvay announced that in the second half of 2023, it will split into two independent listed companies, SpecialtyCo and EssentialCo.

Solvay said the move is aimed at strengthening strategic focus, optimizing growth opportunities and laying the foundation for future growth.

"The plan to split into two leading companies is a key step in our transformation and simplification journey." Solvay CEO Ilham Kadri said that since the GROW strategy was first launched in 2019, several actions have been taken to strengthen financial and Operational performance, allowing the portfolio to focus on higher growth and higher margin businesses.

EssentialCo will include soda ash and derivatives, peroxides, silica and consumer chemicals, performance fabrics and industrial services, and specialty chemicals businesses. Net sales in 2021 will be around EUR 4.1 billion.

SpecialtyCo will include specialty polymers, high performance composites, as well as consumer and industrial specialty chemicals, technology solutions, fragrance and performance chemicals, and oil and gas. Net sales in 2021 will total approximately EUR 6 billion.

Solvay said that after the split, SpecialtyCo will become a leader in specialty chemicals with accelerated growth potential; and EssentialCo will become a leader in critical chemicals with solid cash-generating capabilities.

Under the split, shares of both companies will be traded on Euronext Brussels and Paris.

What is Solvay

Solvay was founded in 1863 by Belgian chemist Ernest Solvay, who, together with family members, developed the ammonia-soda process for the production of soda ash and established a soda ash factory in Couye, Belgium, January 1865 put into production.

In 1873, the soda ash produced by Solvay Company won the prize at the Vienna International Exposition, and the Solvay Law has been known to the world since then. By 1900, 95% of the world's soda ash used the Solvay process.

Solvay survived both world wars thanks to its family shareholder base and closely guarded manufacturing processes. By the early 1950s, Solvay had begun to diversify and resume global expansion.

In recent years, Solvay has successively carried out restructuring and mergers and acquisitions to accelerate global expansion.

In 2009, Solvay sold its pharmaceutical business to Abbott in the United States for 5.2 billion euros, focusing on the chemical business;

In 2011, Solvay acquired the French company Rhodia Group, strengthening its business strength in chemicals and plastics;

In 2015, Solvay entered the new composites field with its $5.5 billion acquisition of Cytec, its largest acquisition ever.

Solvay has been operating in China since the 1970s and currently has 12 production bases and a research and innovation center in China. Net sales in China in 2020 reached RMB 8.58 billion.

Solvay ranks 28 in the 2021 Top 50 Global Chemical Companies list released by the US "Chemical and Engineering News" (C&EN).

Solvay's latest financial report shows that net sales in 2021 will be 10.1 billion euros, a year-on-year increase of 17%; basic net profit will be 1 billion euros, an increase of 68.3% over 2020.