UPDATE: Clariant Buys Sued-Chemie For EUR2 Billion In Shares, Cash, Debt

Clariant AG (CLN.VX) Wednesday said it won't pay a dividend for 2010 despite swinging to a profit as it emerged from a lengthy restructuring, using profits instead to snap up German rival Sued-Chemie AG (SUC.XE) for EUR2 billion.

Basel-based Clariant will add roughly EUR1.2 billion in sales annually by buying Sued-Chemie from JPMorgan Chase & Co.'s (JPM) private equity arm as well as family shareholders for EUR121 a share, paid in swapped shares, cash and debt. To do so, Clariant will raise CHF400 million by issuing new shares.

While chemicals makers are consolidating--including last month's $6.3 billion cash-and-debt bid by E.I. DuPont de Nemours & Co. (DD) for Denmark's Danisco A/S (DCO.KO)--the deal nevertheless surprised analysts due to its large size and because it comes just as Clariant surfaces after several years of slashing spending, closing plants, and letting go of more than 14% of its workforce as part of a restructuring drive to bolster profitability.

Wednesday, Clariant said it swung to quarterly and annual profit from a year-ago net loss as a result of the revamp measures, and forecast low single-digit range sales growth this year and a margin on earnings before interest, tax, depreciation and amortization before exceptional items of more than 2010, when it stood at 9.8%.

In the fourth quarter, Clariant posted a net profit of CHF47 million compared with a year-ago net loss of CHF67 million, after charging CHF331 million in restructuring costs against 2010's earnings. The net profit beat analyst estimates which saw a CHF16.2 million net profit.

Though surprising in its timing, Clariant argued it had to move quickly while Sued-Chemie was on the market, and that while it would continue looking at deals, though not of similar size to the German firm.

"It may come as a surprise to the market and to our stakeholders, we are fully aware of that, but we are convinced we have made real progress in finalizing our restructuring and should switch the company to profitable growth, and Sued-Chemie was on the market now and not next year--there was no possibility to wait," Clariant Chief Executive Hariolf Kottmann told journalists.

Clariant is particularly keen on acquiring Sued-Chemie's two high-margin businesses of catalysts and absorbents, as well as newer technology in development by the German firm, such as clean technologies, cleaning edible oils, and treating wastewater

Clariant said it intends to resume dividend payments after holding back a shareholder payment for 2010 in favor of acquiring Sued-Chemie, but gave little indication when that might be.

-By Katharina Bart, Dow Jones Newswires; +41 43 443 8043; katharina.bart@dowjones.com

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