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To Love Solvay Is To Break It Up: CEO

In December, shareholders of 160-year-old Solvay will gather at a conference centre in downtown Brussels. Rather than a borefest of committee affairs and audits, this meeting promises to be an emotional affair: investors will vote on whether to split the historic chemical company in two.

Center stage will be CEO Ilham Kadri, a former Dow executive and ex-CEO of cleaning-chemical supplier Diversey Inc. She took over four years ago when the board and founding Solvay family, with a 30% stake, were looking for someone to address a stubbornly low stock-market valuation. Something as dramatic as a breakup wasn’t on the cards, but the family got on board.

Solvay’s place in the history books is cemented, but its share-price performance has been less solid. Scientist-turned-entrepreneur Ernest Solvay cracked the code for industrially producing synthetic soda ash. Cash flowed and decades of expansion into new areas like cosmetic ingredients, polymers and composites followed. Yet the fashion for conglomerates with both commodity- and specialty-chemical businesses has waned, and the value of Solvay’s exploits in high-performance materials to lightweight aircraft and EVs were largely overlooked by the stock market.

Following Kadri has been a whirlwind of financial and cultural change sweeping through a company that some considered stuffy and behind the times. Along came a management shake up, a new strategy, sustainability programs, up to EU2 billion in asset sales, and Solvay’s first employee stock ownership plan.

Then, 12 months ago, Kadri and the board proposed the split. Even Solvay’s new headquarters in Brussels that it’s moving into later this year will be sawn in half.

“We looked at all the options, clinically: should we stay the same, or continue selling businesses or do M&A,” Kadri said in an interview with chemicalESG.

Gaining shareholder approval at the December EGM will be her final hurdle and she will be facing a crowd that’s both financially and emotionally invested. Typically, shareholder meetings last up to a couple of hours and attract a few hundred investors: there’s always a good number of descendants of the original founders in the crowd. At last year’s AGM, 67% of the capital was represented, with 31% from Solvac, a Belgian holding company listed on Euronext Brussels that groups together the investments of Solvay family members.

Nothing is being left to chance, according to the CEO. The groundwork is being done and investors educated well in advance (there are YouTube videos, roadshows…you name it). Solvay’s much-improved financial performance and balance sheet will help with the marketing offensive.

Kadri led the carve out of cleaning-chemical maker Diversey from Sealed Air Corp. and she’s says she has taken the best practises from that experience, while avoiding repeating some of the mistakes. This time around, Solvay set up a fully dedicated in-house team to oversee the separation so that senior leadership, business unit heads and functional executives didn’t get distracted.

“Last time, it was a bit everybody was doing everything,” she said. “People asked me why are you taking so much time for something that could be done in six to 12 months. I don’t regret that we gave ourselves a buffer because we needed to go through 2022, which was not an easy year.”

The dedicated team, with the help of some consultants, has already spent a year working on the “heavy” separation process to create two functioning organisations, all in the midst of turbulent markets and economies. For now, they are referred to as EssentialCo and SpecialtyCo. The former is Solvay’s legacy EU5.5 billion revenue commodity business, comprised of soda ash, peroxides, silica, coating additives as well as Special Chem (rare earth and fluor chemicals). The latter is the more dynamic, a world of complex polymers, ingredients and composites for aircraft wings, battery materials, cosmetics etc.

Around June or July, Solvay will lay out the capital structures for E-Co and S-Co and seek feedback from credit agencies in the quest to win investment-grade ratings. Sometime in the third quarter, Solvay will start conversations with bondholders to get them on board. And finally, in the fall, both businesses will hold investor days.

“There’s a lot of hard work, sweat and pain. You don’t wake up every morning and decide to split a 160-year-old company,” Kadri said.

(This story was updated on March 17 to provide the latest revenue figure for E-Co and correct how long CEO Kadri has been at Solvay.)

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