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27-Mar-2016

SABIC considers divesting US plastics distributor for USD500 million; not a game changer

According to an article on Bloomberg, SABIC is currently considering the sale of its US based distribution business, Polymershapes, which was part of SABIC's USD11.6 billion acquisition of general electric company's plastics operations in 2007. Polymershapes is the world’s largest distributor of plastic films, sheets and rods used to make products ranging from aircraft to building materials. The article mentions that the business is valued at USD500 million, according to sources familiar with the matter. We do not think the sale of Polymershapes would be a game changer for SABIC given its minimal size (less than 1% of SABIC's current market cap), but we view this positively from a bigger picture perspective, as this could be the start of further restructuring and more asset sales. Given that SABIC’s US assets have historically been loss-making and a drag on earnings, more assets sales or restructuring on this front could eventually translate to improved earnings and operations for SABIC. (Bloomberg, Ahmed Hazem Maher, Yousef Husseini)   SABIC: SAR76.77 as of 24 March 2016, Rating: Buy, FV: SAR85.00 per share, MCap: USD61,416 million, SABIC AB / 2010.SE

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