Clariant is the demerged specialty chemicals entity of the former Sandoz group. The erstwhile Ciba-Geigy, on the other hand, had spun off its speciality chemicals business into a single enterprise -- Ciba Specialty Chemicals, before tying the knot with Sandoz to form Novartis.

Clariant India managing director PR Rastogi said the planned merger would see the formation of a specialty chemicals giant with "consolidated strengths" in fine chemicals, pigments and additives and a sales turnover above Rs 750 crore.

Clariant India closed 1997-98 with sales of Rs 205 crore, while corresponding figures for Ciba Specialty Chemicals (India) were Rs 312 crore.Clariant, however, was in the process of combining forces with Colour-Chem India, which in turn brings in additional sales of Rs 373 crore.Clariant shareholders will get about 54 per cent and Ciba shareholders 46 per cent of the registered shares in the new company, which will be called Clariant but will maintain Ciba's butterfly logo.A joint statement from Switzerland said that Clariant shareholders will receive 5.35 registered shares of the new company in exchange for each share of Clariant (CHF 50-nominal value). Ciba shareholders will receive one registered share of the new company in exchange for each Ciba Specialty Chemicals share (CHF 10-nominal value). There will be separate dividend dividend payments for 1998 and in 1999, with the first new joint venture dividend payment to be in 2000 for the year 1999.

Ciba Specialty Chemicals India managing director BN Hutter however, said that the swaps in India would be based on a separate valuation exercise.Significantly, shares of both companies were lockedafter registering identical gains of eight per cent on Indian bourses. While the Clariant scrip rose to Rs 232, Ciba shares were locked at Rs 143 with 1,65,000 scrips being traded on the Bombay Stock Exchange.The global merger is expected to generate over CHF 600 million in annual pre-tax savings by the end of 2001. It may also see a reduction of about 3,000 jobs, roughly 5 per cent of the total work force of 55,000.

While both Rastogi and Hutter maintained that it was too early to comment on the proposed rationalisation vis-a-vis the Indian operations, analysts say that "some trimming would obviously be necessary". Clariant India and Colour-Chem India have a combined employee strength of 2,250, while Ciba, slightly leaner, will bring with it another 900-and-odd personnel (inclusive of those at an upcoming facility at Chennai).

Clariant chairman Rolf Schweizer will take charge as chairman and president of the new entity, while Ciba chairman Rolf Meyer will be chief executive and vice-chairman. Thenine-member board of directors of the new company will comprise three directors drawn from each of the two companies and one independent board member.Meanwhile, a definitive merger agreement is expected to be completed in December 1998, pending due deligence. The merger is subject to shareholder and regulatory approvals.

Complications aplenty

Big may be beautiful, but size very often brings with it complications on the operational front. The proposed Clariant-Ciba Specialty merger in India may face a host of business-made complications, arising out of an unfinished Clariant-Colour-Chem merger--transfer of Colour-Chem's textile dyes business to DyStar India (a joint venture between Hoechst and Bayer) and Ciba's intent to examine a possible divestment of its performance polymers