CHEMICAL UPDATE
JUNE 2010
McIlvaine Company
TABLE OF CONTENTS
Bayer Sees Polyurethane Volumes Returning to Pre-Crisis Levels
BASF to Build New North American HQ in New Jersey
Dow Chemical Considers Turkish Plastics JV
Dow Closes Sale of Styron Division to Bain Capital for $1.63 Billion
Dupont Builds Film Plant for Laminated Glass
Corn Products International to Acquire National Starch from Akzo Nobel
Bayer AG, the world’s biggest maker of foam-like materials used in construction and upholstery, expects to crank out plastics at volumes close to pre-crisis levels as customers in Asia race to meet demand, Bloomberg reports.
“I am optimistic we may this year already reach the volume levels of 2008” for polyurethanes, said Peter Vanacker, who heads the Leverkusen, Germany-based company’s polyurethane business, in an interview at the headquarters. Much of the growth stems from China, he said on June 11.
“Five years from now, China will overtake the U.S. as the largest market for polyurethanes,” said Vanacker.
Alongside polyurethanes, of which Bayer controls more than 25 percent of the global market with an annual production capacity of around 4 million metric tons, the German company claims the top spot in polycarbonates. These are tough lightweight plastics used to make products from bulletproof windows to CDs. Production capacity is running about 90 percent, said Patrick Thomas, the head of Bayer MaterialScience AG.
In polyurethanes, Bayer competes with Germany’s BASF SE, the world’s largest chemical maker, as well as and Dow Chemical Co. and Huntsman Corp. Bayer’s shares have lost 15 percent this year, making them the second-worst performer in the 18-member Bloomberg Europe Chemicals Index, which has fallen 0.9 percent.
Demand is so tight that one client in South-East Asia recently offered to pay more for some polycarbonates in exchange for supply guarantees, said Thomas. The 147-year-old company also makes drugs and crop treatments.
“Global demand for polyurethane is growing at a rate of about 5 percent a year,” said Vanacker. “In 2009, world demand dropped at two percent or three percent, while this year we’ll see growth of well above 5 percent.”
Bayer held its budget for research and development for its MaterialScience business steady at 340 million euros ($417 million) from 2006 to 2009, while sales dropped to 7.5 billion euros from 10.2 billion euros in that time.
Though the portion spent in China stands at 10 percent to 15 percent, this will “escalate in the future,” Thomas said.
Bayer is developing plastic foams for train tracks, allowing trains to run at higher speeds with fewer vibrations and noise. It is also developing a polyurethane roof to replace current steel roofs “with a well-known carmaker” to save on weight, said Vanacker, declining to disclose the customer’s name.
German chemical major BASF plans to construct a $100 million building at a former ExxonMobil site in Florham Park, N.J., to serve as its North American headquarters, according to site owner Rockefeller Group. The structure will be finished by mid-2012 and hold more than 1,000 workers, most of whom will come from an adjacent BASF site, said Leslie Smith Jr., a Rockefeller Group executive vice president.
BASF is based in Germany and is the world's largest chemical company. Among other things, the company produces chemicals, plastics and agricultural products.
Dow Chemical Co said it’s in talks on taking part in a Turkish venture that would require billions of dollars in investments.
Local companies are involved in preliminary discussions on setting up a plastics-manufacturing joint venture, Kostas Katsoglou, Dow’s head of eastern European and Russian operations, said recently in an interview at a conference in Istanbul. No decision is expected this year, and Dow is still accessing the extent of its participation, he said.
“Within coming months, we will be in a much more advanced stage in terms of scoping out the project and taking internal decisions necessary to implement it,” the executive said. “We want to build a world-scale plant and make sure it is part of our global grid.”
Dow Chemical acquired two plants in Turkey when it bought Rohm & Haas Co. last year, doubling the number of its manufacturing sites in the country to four. The Midland, Michigan-based company has about $700 million in sales annually in Turkey, where Dow plans investments of less than $100 million to expand local production, Katsoglou said.
Russia, Poland, Turkmenistan and the Czech Republic also offer opportunities for growth, and those countries will receive “a lot of investment in the next 10 years” from Dow, Katsoglou said.
Dow Closes Sale of Styron Division to Bain Capital for $1.63 Billion
The Dow Chemical Company and Bain Capital Partners, a leading global private equity firm, announced jointly recently that they have closed the sale of Dow’s Styron Division to an affiliate of Bain Capital. Dow has elected to retain a 7.5 percent equity position in Styron, which is now a privately held, global materials company. Also included in the transaction are several long-term supply, service and purchase agreements between Dow and Styron that will generate substantial additional value for both companies.
“The Styron divestiture is another major step in Dow’s transformation and a strong example of our disciplined approach to portfolio management and business prioritization,” said Andrew N. Liveris, Dow Chairman and Chief Executive Officer. “With the close of this transaction, we have exceeded our goal of divesting $5 billion of non-strategic assets, and we have done so in just five quarters. These divestitures have enabled Dow to both reduce debt and liberate capital and resources for Dow’s higher growth, higher margin businesses.”
"We are excited to see Styron emerge as an independent company. The Styron management team, together with our new partners at Dow, have worked tirelessly to provide Styron with the capabilities to pursue its global growth strategy," said Steve Zide, a Managing Director at Bain Capital. "We are confident that the management team led by Chris Pappas, and all of Styron's employees around the world, will further expand and strengthen the Company's leadership positions with a continued commitment to excellent service to customers and business partners."
Styron is positioned as a leading materials company with global reach and a unique product portfolio, bringing together plastics, rubber and latex businesses that share feedstocks, operations, customers and end users. Styron has approximately $3.7 billion in revenue (based on 2009 data), with manufacturing facilities at 20 locations in 13 countries around the world. Styron has approximately 2,000 employees based in 30 countries worldwide.
Businesses and products included in this transaction are: Styrenics – Polystyrene (PS), acrylonitrile butadiene styrene (ABS), styrene acrylonitrile (SAN) and expandable polystyrene (EPS); Emulsion Polymers (paper and carpet latex); Polycarbonate (PC) and Compounds & Blends; Synthetic Rubber; Automotive Plastics; and some styrene monomer assets.
Dow announced its plan to form the Styron Division and explore divestiture options in July 2009. A definitive agreement between Dow and Bain Capital Partners was signed and announced in March 2010.
DuPont group is constructing a new plant for the production of films for laminated glass in the Moravian town of Holesoy in the Czech Republic.
The global chemicals and plastics group, through its local subsidiary Retrim-CZ, is investing around €9.2m in the new facility which initially will employ 15. It is scheduled to be launched in October this year.
DuPont, with a national base in the Czech capital Prague, acquired the Czech safety glass interlayer company Retrim, a specialist in recycling PVB (polyvinyl butyral resin) materials, based in Zlin in 2004. Its technology allows the re-use of the material in the manufacture of automotive and architectural laminated glass.
DuPont was already producing safety glass interlayer materials at other plants in South Korea, the US and Germany. The Czech acquisition was also designed to boost DuPont’s presence in central and eastern Europe.
In 2009, the US group, which employs a total of 111 people in the Czech Republic, opened a structural demonstration centre in Prague.
Corn Products International, Inc., a provider of ingredient solutions for diversified industries, has entered into a definitive agreement to acquire National Starch, LLC, a supplier of specialty starches for the food industry, from Akzo Nobel N.V. Azko Nobel will receive $1.3bn in cash and the buyer will assume certain pension and employee benefit liabilities.
The transaction, which has been approved by the Boards of both AkzoNobel and Corn Products International, is expected to close at the end of the third quarter of 2010, subject to the appropriate regulatory approvals.
Corn Products International is a leading global provider of ingredient solutions for diversified industries based in Westchester, Illinois, in the US.
National Starch – a subsidiary of the former ICI – was taken over by AkzoNobel as part of its acquisition of ICI in January 2008. While it was regarded as an excellent business, the Board of AkzoNobel concluded that National Starch did not offer sufficient opportunity to create value within the company’s transformed coatings and specialty chemicals portfolio. In April 2010, it was announced that AkzoNobel had received renewed expressions of interest in National Starch, which had accordingly been reclassified as a discontinued operation.
Corn Products intends to finance the transaction through cash, debt and new equity.
J.P. Morgan Securities, Inc. is acting as exclusive financial advisor to Corn Products. Morgan Stanley is acting as financial advisor and Skadden, Arps, Slate, Meagher & Flom LLP is acting as legal advisor to Akzo Nobel on the transaction, which is expected to close in the third quarter of 2010.
The acquisition allows Corn Products to align its strategic priorities to grow its ingredient portfolio, increase its presence in priority food processing segments and enter new markets. It also enables Corn Products to access new markets such as Europe and improves its scale and capabilities in many of its existing locations. Corn Products also expects significant production efficiencies and cost synergies from the acquisition.
German chemical company BASF is set to buy Cognis for about $4 billion, according to several reports in international newspapers.
Cognis Corp., the company’s North American subsidiary, is headquartered in Winton Place.
Cognis was spun off from Henkel Corp. in 2001 and is owned by Goldman Sachs and the private equity firm Permira. Henkel had previously acquired the oleochemical manufacturing business that was founded in Cincinnati as Emery Industries and later became part of Quantum Chemical.
In 2006, Cognis spun off about 70 percent of its production facilities in Winton Place and St. Bernard into a joint venture with Malaysia-based Sime Darby. It later sold its stake to Thailand-based PTT Chemicals. That venture is now known as Emery Oleochemicals and would not be directly affected by a sale of Cognis to BASF.
As of the end of last year, Cognis employed about 570 people in Cincinnati. It makes specialty chemicals for its wholly owned Care Chemicals and Functional Chemicals business units.
Based in Monheim, Germany, Cognis is a global producer of specialty chemicals and nutritional ingredients, mostly derived from plants.
McIlvaine Company
Northfield, IL 60093-2743
Tel: 847-784-0012; Fax: 847-784-0061
E-mail: editor@mcilvainecompany.com
Website: www.mcilvainecompany.com