DyStar India is a wholly-owned subsidiary of the global dyestuffs joint venture of German multinationals Hoechst and Bayer. Colour-Chem, which had transferred its textile-dyes business to DyStar India, has forged a toll-manufacturing agreement with the latter. However, the arrangement with DyStar also incorporates a non-compete clause in the area of textile dyes. This, in turn, has been perceived as an irritant to the Colour Chem-Clariant merger given Clariant's powerful presence in textile dyes.

Industry analysts say a lot could depend on whether Bayer wishes to exercise the first right of refusal, if any, in the DyStar venture or whether the proposed divestment could see the entry of a new partner or arealignment within the overall Clariant-Colour Chem group. Colour-Chem India had also received a specific compensation for the transfer of its textile-dyes business to DyStar India.

"If there is a realignment within the group, it may actual simplify things for Clariant in India," an analyst said. Clariant, now on course to a mega merger with Ciba Specialty Chemicals, had earlier decided to acquire Hoechst's speciality-chemicals business, represented by Colour-Chem in India, as part of a global restructuring effort. In India, however, Sebi has held that Clariant International will have to make an open offer for acquiring 51.1 per cent of Colour-Chem's equity in the country. India is the only country which has apparently yet to complete the Clariant-Colour Chem merger.

Agency reports say that Hoechst will initially retain, but aimed to sell eventually, its shareholdings in industrial businesses such as Clariant (45 per cent), Dyneon (46 per cent), DyStar (50 per cent), Messer (66.66 per cent), Targor (50per cent), Trespaphan (100 per cent) and Wacker (50 per cent). The German multinational, which had announced dismal results, said that it will divest these holdings when possible to realise the appropriate value for shareholders.

Hoechst AG also said it was splitting itself into two, but it stayed silent on rumours of its plans to merge with France's Rhone-Poulenc. The split entities will be Hoechst AG and Celanese AG, with Hoechst concentrating on life sciences and Celanese on industrial chemicals.