Report: Semperit to terminate Thai joint venture

Vienna, Austria – Semperit AG and Sri Trang-Argo Industry Public Co. Ltd. plan to terminate virtually all joint business activities after failing to resolve legal disputes.

The multi-company transactions, which a spokeswoman said are expected to close in March, will impact Semperit's Sempermed, Semperflex and Semperform businesses, especially in the US and across the Asian region.

After 27 years of cooperation, the two companies signed an agreement 18 Jan that will, among other things, demerge their large protective glove production joint venture, Siam Sempermed Corp. Ltd., in Thailand. It also will give Semperit full ownership of Semperflex Shanghai with a hydraulic hose production plant in China.

Once the proposed agreement is approved by all parties, the company said, all pending arbitration and civil proceedings between Semperit, Sri Trang and Siam Sempermed will be settled by mutual consent.

Under the proposed pact, Semperit will become sole owner of Sempermed USA, a joint venture glove distribution company in the US, while Sri Trang will assume control of the joint glove production plant in Thailand. Sempermed USA serves the North American region. All Sempermed brands will continue to be owned solely by Semperit.

In addition, Semperit will take over Sempermed glove joint ventures in Singapore, China and Brazil as well as gain a majority interest in Formtech, a Malaysian producer of ceramic moulds used in the production of gloves.

Semperit's Semperform business also will assume full ownership of a joint venture in China.

One joint venture – Semperflex Asia, a producer of hydraulic hose based in Thailand – will continue to be operated by both companies. Semperit will own 50% of the operation while Sri Trang and some partners will own the other half.

However, the spokeswoman said Vienna-headquartered Semperit will hold an option to purchase the remaining 50% of the Thailand venture for about $60 million (€56 million). That option runs from 2019 through 2021, she said.

The spokeswoman said the planned transactions are subject to the approval of the firm's supervisory board, passage of a corresponding resolution at the extraordinary general meeting of Thailand-based Sri Trang as well as closing conditions.

"Semperit would have wanted to continue the joint venture Siam Sempermed," according to Veit Sorger, chairman of the firm's supervisory board. "However, due to the experiences with the joint venture during the past years, the agreement reached now is the right step for Semperit."

He added that Semperit "would like to successfully continue the reduced cooperation (between the two companies) in the Semperflex segment."

Calling the agreement fair for both parties, Semperit CEO Thomas Fahnemann said that after settlement of the legal disputes, "we can fully focus on the development of our own business. We will continue our growth path in both the industrial and medical sectors with full power."

Within the framework of the joint venture termination pact, Semperit will receive a one-time compensation payment of about $167.5 million before taxes. It said that prior to closing, Siam Sempermed will declare a dividend equivalent to around $118.2 million, of which Semperit will receive approximately $51 million, and the remaining joint venture Semperflex will declare a dividend of about $30 million.

"With the cash inflow," Fahnemann said, "we will continue to strengthen our capital basis and advance our investments."

Even after the separation, the spokeswoman said, Semperit's Sempermed business will remain one of the leading global companies in the examination and protective glove market and retain "excellent access through its dense distribution network in Europe and North America."

It will be strengthened further with the takeover of Sempermed USA, she added.

On the production side, Semperit operates surgical glove plants in Austria and Malaysia. By the end of 2017, its capacity at the two facilities is expected to be around 10 billion units.