CHEMICAL UPDATE
JULY 2011
McIlvaine Company
TABLE OF CONTENTS
Ecolab to Buy Nalco for $5.4 Billion to Add Water Treatment
Braskem Buying Dow's PP Business
Akzonobel to Acquire China's Leading Specialty Surfactant Producer
Eastman to Acquire Sterling Chemicals
Dow and Saudi Aramco Announce JV to build World-Scale Chemicals Project
Lanxess Building $40m Changzhou Plant
Nova Chemicals to Construct Two New Polyethylene Lines in Canada
BASF Boosts R&D on Electromobility
Flow Polymers Plans Another Line for Sureflo Additive
Amyris Expands Into Asia, Forms Novvi S.A.
Palram Adding Extrusion Capacity in Pennsylvania
Ecolab Inc., the largest maker of cleaning chemicals for hotels and restaurants, agreed to acquire Nalco Holding Co. for $5.4 billion in cash and stock to add water-treatment services.
Ecolab is offering $38.80 a share or 0.7005 of a share for each Nalco share, St. Paul, Minnesota-based Ecolab said today in a statement. Ecolab will use about $1.6 billion in cash and issue about 68.9 million shares to pay for the deal.
Buying Naperville, Illinois-based Nalco will diversify Ecolab's customer base, which is dominated by the hospitality industry and hospitals. Nalco's Corexit dispersant was used to help clean up the oil spill from BP Plc's Macondo well in the Gulf of Mexico last year.
Ecolab said $150 million of cost savings have been indentified from the deal, which was unanimously approved by both companies' boards. The takeover will add to earnings per share from 2012, with adjusted earnings next year of about $3 a share for the combined companies, Ecolab said. The deal will close in the fourth quarter, subject to regulatory approval, it said.
"We identified water management as a key future growth segment for us given its growth characteristics and importance to our customers," Ecolab Chief Executive Officer Douglas M. Baker said in the statement.
Bank of America Merrill Lynch and Baker & McKenzie advised Ecolab. Goldman Sachs Group Inc. and Cravath Swaine & Moore LLP advised Nalco.
Ecolab is paying 10.9 times Nalco's earnings before interest, taxes, depreciation and amortization, compared with the 9.7 median multiple of eight comparable deals announced in the past eight years, according to Bloomberg data.
Brazilian plastics giant Braskem SA has made another big move in the polypropylene market, this time acquiring the PP business of Dow Chemical Co. for $323 million.
The deal makes Săo Paulo-based Braskem the largest PP producer in North America, and includes two U.S. plants and two in Germany, with total annual capacity of 2.3 billion pounds, the company said July 27.
A spokesman with Midland, Mich.-based Dow confirmed the sale July 27. He also said the sale price was 6.7 times annual earnings before interest, taxes, debt and amortization for the business.
Officials had confirmed in late May that Dow was shopping around its PP resin, licensing and catalyst businesses. The confirmed sale does not include Dow’s PP catalysts unit.
Dow produces PP at its complexes in Freeport, Texas, and Seadrift, Texas. According to Braskem, the two U.S. plants will increase its PP capacity by 50 percent in the region to an annual production capacity of 3.1 billion pounds.
The two plants located in Germany, at the petrochemical complexes of Wesseling and Schkopau, have annual capacity of 1.2 billion pounds of polypropylene.
“The acquisition of Dow's assets consolidates our leadership in polypropylene in the U.S., the largest thermoplastic resins market, and it also enhances our current position in Europe, an important market for our biopolymers strategy,” said Braskem CEO Carlos Fadigas, in a news release.
“In addition, as our second acquisition in the U.S., this transaction will enable Braskem to capture approximately US $140 million in synergies (net present value) through a more diversified portfolio, a more leveraged fixed cost base and working capital, logistics and supply optimization,” he added.
The deal is scheduled to close by the third quarter, pending regulatory approvals. Last year, Braskem acquired the PP business of Sunoco Inc. - including plants in Pennsylvania, West Virginia and Texas - for $350 million in cash.
AkzoNobel plans to further strengthen its leadership position in specialty surfactants while enhancing its manufacturing footprint in Asia by acquiring Boxing Oleochemicals. Boxing is the leading supplier of nitrile amines and derivatives in China and throughout Asia.
Established in 1993 and based in the province of Shandong, Boxing had revenues in 2010 of approximately €100 million. Its activities will be integrated into AkzoNobel's Surface Chemistry business, a global leader in the manufacture and supply of specialty surfactants, synthetic and bio-polymers additives, used as formulation ingredients and process aids in many applications ranging from home and personal care to asphalt road paving. Demand in Asia for amines and derivatives is being driven by population growth, expanding middle class, increased focus on sustainability and the build-up of infrastructure, notably in China and India.
"This is an excellent opportunity which couples our strategic ambition to accelerate growth in Asia with our commitment to locate production closer to our customers," said Rob Frohn, AkzoNobel's Executive Committee member responsible for Specialty Chemicals. "Boxing's leading market position in amines will complement AkzoNobel's growing specialty surfactant business in Asia. The acquisition will also provide a strong local manufacturing operation in the region."
Added Bob Margevich, Managing Director of AkzoNobel Surface Chemistry: "The demand for amines and derivatives is expected to increase significantly over the next few years, with a third of the Asian demand for amines coming from China alone. We plan to enhance the process capabilities and increase capacity at the Shandong site by introducing our state of the art manufacturing technology. We will also introduce new products to the marketplace based on AkzoNobel's product and application knowhow."
The completion of the transaction is subject to closing conditions, including the approval of the Chinese authorities. It is expected to be finalized in the last quarter of 2011.
Eastman Chemical Company has entered into a definitive merger agreement to acquire Sterling Chemicals, a single site North American petrochemical producer, for $100 million in cash, subject to modest deductions at closing as provided in the merger agreement. The transaction, which includes Sterling’s plasticizer and acetic acid manufacturing assets in Texas City, TX, is expected to be accretive to Eastman’s full-year 2012 earnings per share in excess of Eastman’s cost of capital.
Eastman plans to modify and restart Sterling’s currently idled plasticizer manufacturing facility to produce non-phthalate plasticizers, including Eastman 168 non-phthalate plasticizers. This additional capacity will enable the company’s Performance Chemicals and Intermediates (PCI) segment to serve the growing market demand for non-phthalate alternatives. In the North American and European non-phthalate plasticizers markets, total sales volume is expected to increase at a compounded annual rate of approximately 7% over the next five years.
“This acquisition supports our growth strategy for our plasticizer product line and will enable us to keep pace with the growing demand for non-phthalate alternatives, like our Eastman 168,” said Ron Lindsay, executive vice president, performance chemicals and intermediates and fibers. “We look forward to working with Sterling employees as we bring this additional capacity online and continue to grow this business.”
The acquisition also includes Sterling’s acetic acid production facility and its supply to BP Amoco Chemical Company under a long-term production agreement.
The Dow Chemical Company (NYSE: DOW) and the Saudi Arabian Oil Company (Saudi Aramco) recently announced that the Boards of Directors of both companies have approved the formation of a joint venture (JV) to build and operate a world-scale, fully integrated chemicals complex in Jubail Industrial City, Kingdom of Saudi Arabia.
The authorization for the new joint venture, named “Sadara Chemical Company”, comes after an extensive project feasibility study and front-end engineering and design effort which began in 2007.
Comprised of 26 manufacturing units building on Saudi Aramco’s project management and execution expertise, and utilizing many of Dow’s industry leading technologies, the complex will be one of the world’s largest integrated chemical facilities, and the largest ever built in one single phase. The complex will possess flexible cracking capabilities and will produce over 3 million metric tons of high value-added chemical products and performance plastics, capitalizing on rapidly growing markets in energy, transportation, infrastructure and consumer products.
Construction will begin immediately and the first production units will come on line in the second half of 2015, with all units expected to be up and running in 2016. Once operational, Sadara is expected to deliver annual revenues of approximately $10 billion within a few years of operation and generate thousands of direct and indirect employment opportunities through the complex and related investments in downstream value parks.
“Today’s announcement is outstanding proof of Dow’s ongoing commitment to our growth strategy,” said Andrew N. Liveris, Dow’s chairman and chief executive officer. “This premier partnership is the right economic ownership model with the right partner. It is designed to capture growth in the rapidly growing sectors of energy, transportation and infrastructure, and consumer products by creating a manufacturing hub that will provide a differentiated product slate and an advantaged cost position.”
Liveris added, “We are bringing the best of Dow’s technology-differentiated and globally leading products to Sadara. Customers in emerging geographies such as China, the Middle East, Eastern Europe and Africa will benefit from a strong supplier with feedstock integration, in-market commercial and supply capabilities, advanced technologies and resources to grow with their demand. Taken together, Sadara will deliver significant new equity earnings to Dow.”
Total investment for the project, including third party investments, will be approximately $20 billion. Sadara will become an equal joint venture between Saudi Aramco and Dow after an initial public offering. In addition to equity from the partners, Export Credit Agencies and financial institutions will provide project financing to Sadara.
Khalid Al-Falih, president and CEO of Saudi Aramco, said, “This project represents a key milestone in Saudi Aramco’s ambitious downstream growth strategy. We are pleased to have Dow as our partner, as they bring a fantastic record of success in the chemicals business and a top tier brand to the project. Dow also brings a superior mix of downstream product technologies, and world-class operational and marketing capabilities to the Sadara joint venture. These will complement the strengths of Saudi Aramco as the world’s largest integrated and most reliable supplier of energy and petroleum-based derivative products.”
Al-Falih explained, “Many of Sadara’s products will be produced for the very first time in Saudi Arabia. This enterprise will play a key role in the Kingdom’s industrial and economic diversification while contributing to the creation of thousands of high quality jobs. It will enable significant development in the country’s conversion industry, thereby supporting Saudi Arabia’s ambition to be a magnet for downstream manufacturing investments that add significant value to the Kingdom’s hydrocarbon resources.”
The complex will include a world scale cracker that will be able to crack a wide range of feedstocks and be supplied by Saudi Aramco’s extensive integrated hydrocarbon infrastructure. Utilizing Dow’s state of the art product technologies and Saudi Aramco’s project management and execution capabilities, the manufacturing units will produce a wide range of performance products such as Polyurethanes (isocyanates, polyether polyols), Propylene Oxide, Propylene Glycol, Elastomers, Linear Low Density Polyethylene, Low Density Polyethylene, Glycol Ethers and Amines.
Sadara will have responsibility for product marketing within a local zone of eight countries. Dow will market and sell on behalf of Sadara to all countries outside of the Middle East zone.
Jubail Industrial City is the largest industrial complex of its kind in the world. It is located in the Eastern Province of the Kingdom of Saudi Arabia, approximately 100 kilometers northwest of Dammam.
German leading specialty chemicals company Lanxess AG started the construction of its largest leather chemical plant in China in Changzhou, Jiangsu province, on Monday.
Analysts have said China's rising demand for leather goods will present great market opportunities for leading domestic and multinational leather chemical manufacturers.
The $40 million facility, located in Changzhou Yangtze Riverside Industrial Park of Jiangsu province, is due to start production in the first half of 2013 with a designed capacity of 50,000 tons a year, according to Rainier van Roessel, member of the Lanxess board of management.
The new Lanxess plant, described as one of the largest of its kind in Asia, will use the latest technology and environmentally friendly processes to serve the fast-growing Chinese market.
Leather garments, furniture, handbags, and car seats have come into greater demand through China's growing taste for high-quality and luxury goods.
"This love of leather has made China into not only the world's leading producer of leather products, but also an increasingly avid consumer," said Van Roessel, adding that the groundbreaking of the new facility marks an important step forward for the growth of Lanxess' leather business.
China's leather chemical market will experience an annual growth rate of 8 percent, outpacing the global annual growth rate of 0.58 percent for the next five years, according to market research by the Shenzhen-listed specialty chemicals company Brother Enterprises Holding Co Ltd.
Lanxess' new plant will predominately serve the Chinese market, producing more than 700 leather chemical products for all stages of leather processing - from tanning to dyeing and finishing.
It will supply the automotive, furniture, garment and shoe industries, which together account for most major leather applications, said Markus Eckert, head of the Lanxess leather business unit.
"With this new plant, we will set new benchmarks for sustainability. In the leather sector, this means more efficient production, processing, recycling and reduction of emissions from end products," Eckert said.
It is estimated that by 2015, the global leather chemical demand will expand to 2.07 million tons, of which up to 793,000 tons will come from China, accounting for 38.29 percent of the global market, said Wang Xi, an industrial analyst from Industrial Securities Co Ltd.
Lanxess' leather business unit has become a driving force of the company's performance in Asia and the world. More than 40 percent of Lanxess' sales are in Asia, according to Eckert.
As the global center for leather products shifts to Asia, so does the world's leather chemical manufacturing market. However, more than 90 percent of China's high-end and green-leather chemical manufacturing is currently dominated by multinational companies.
The nation's more than 150 leather chemical companies are mainly producing low- to medium-level products with limited added value, and these companies are scattered throughout Zhejiang, Guangdong, Sichuan, Liaoning and Shandong provinces and Shanghai, according to the Brother Enterprises research report.
Lanxess is one of the largest leather chemical producers in China by market share. China has become the company's fastest-growing market and a major pillar of its global business, according to an article in ChinaDaily.
Nova Chemicals is planning to expand polyethylene operations at its Joffre facility near Red Deer and in Sarnia, Ontario, Canada. The firm said engineering and feasibility studies will be complete in 2012. The startup of its new polymer expansion lines should begin in the 2014-17 period.
Spokesman Pace Markowitz said more details will be released when the feasibility study and engineering stages are complete.
The Joffre plant has been short of ethane and had to import some this year from the U.S., but Markowitz said the future looks brighter. He said examples of the additional sources are a recent agreement with Hess Corporation and Mistral Energy for supply of ethane from the Williston Basin (a shale oil play in North Dakota). Nova also recently announced an agreement with Williams for ethane extracted from off-gas from the oilsands.
The firm also has a deal tied to an AltaGas plant that will increase Nova’s supply of ethane from natural gas based sources in Alberta.
Joffre is one of the largest ethylene/polyethylene operations in North America, and will add Advanced Sclairtech technology that produces high-performance polyethylene resins for things such as food packaging, heavy duty sacks and industrial storage containers. Also added will be a world-scale NovaPol technology line that will produce resins that have superior versatility, used for industrial products such as custom marine parts, water tanks and chemical storage containers as well as consumer products such as stretch wrap and diaper linings.
Nova is owned by the International Petroleum Investment Co. of Abu Dhabi.
Materials supplier BASF SE plans to invest more than 100 million euros over the next five years researching new materials for batteries.
A focus of the investment is the construction of a $50 million production plant for advanced cathode materials in Elyria, Ohio. The plant is scheduled to supply cathode materials for high-performance lithium-ion batteries by mid-2012.
In addition, the Ludwigshafen-based company has begun development of electrolyte materials, and it is researching future battery concepts such as lithium-sulfur or lithium-air.
“With our research activities we are substantially contributing to making electric cars affordable, environment friendly and sustainable,” said Andreas Kreimeyer, the company’s research executive director. “For this we need batteries and further innovative components that provide a greater driving range with less weight and lower costs.”
He added that plastics will play supporting roles in battery-powered vehicles, too. Designers will need to make vehicles lighter to compensate for the additional weight of batteries, and polymers will be needed to help manage improve heat management in electric cars.
“If industry together with politics, science and society as a whole all pull in the same direction, electromobility will be successful and become an affordable and sustainable alternative to the classical internal combustion technology,” Kreimeyer said in a news release.
Rubber additives maker Flow Polymers LLC might be a relative newcomer to the world of plastics, but the firm is making up for lost time with plans to add a second production line for its SureFlo plastic additives by the end of 2012.
SureFlo can be combined with resins, compounds and regrind material and can be used in injection molding, extrusion and thermoforming, global plastics market business manager John Jungjohann said in a recent interview at the firm’s Cleveland headquarters.
To date, the material—available as a dry blend, but also meltable—has been used in resins including polyethylene, polypropylene, polystyrene, ABS and nylon. It first was commercialized in 2009, shortly after being acquired from a supplier to Flow’s rubber businesses. Flow officials declined to identify the seller, and described SureFlo as “a proprietary mix of hydrocarbon resins.”
SureFlo can increase flow and line speed, and allow different resins to be reprocessed together, officials said. Growth in the product line has led Flow Polymers to buy additional extrusion equipment, which will be up and running by the end of next year. The new line will double the firm’s current SureFlo capacity of 50 million pounds per year.
Officials with Flow declined to provide sales, but are estimated between $50 million and $100 million. Officials recently said sales in the rubber-based business have averaged 14 percent growth annually for the last 10 years.
More than half of Flow’s rubber-based sales come from outside of North America. The possibility of opening a plant in Asia has been discussed.
Amyris recently announced that the company is expanding into Asia via a collaboration with Wilmer International Limited. The partnership will focus on the development and worldwide commercialization of a family of surfactants derived from Amyris Biofene for use in a multitude of products including personal care and consumer packaged goods. Biofene will be designed as a replacement for nonylphenol ethoxylate surfactants (NPEs), a $1 billion per year market. The chemical is becoming highly restricted due to global health and environmental concerns.
In other Amyris partnership news, their partnership with Cosan S.A. is moving forward with the creation of a joint venture called Novvi S.A. This Brazilian-based company will develop, commercialize and produce renewable base oils, also using Amyris Biofene geared for the lubricants market. The execution of the Joint Venture Implementation this week is the last step before Novvi S.A. begins operations.
Thermoplastic sheet maker Palram Industries Ltd. will install a new high-speed polycarbonate extrusion line at its Allentown, Pa. plant.
Palram will move the warehouse portion of its business across the street from its existing location. The $3.6 million project will create at least 40 jobs within three years and retain 202 existing positions.
According to a June 16 news release from Pennsylvania Gov. Tom Corbett, the move is to enhance the company's position in the diversified industrial plastics marketplace.
According to the governor’s office, Palram received a $198,000 funding offer from the state Department of Community and Economic Development, including a $100,000 opportunity grant, $18,000 in job training assistance and $80,000 in job creation tax credits.
"The incentive programs offered to us by [the state] allow us to further cost-justify our continued local investment in state-of the-art extrusion equipment, job creation and training to the benefit of our company, our community and the Commonwealth of Pennsylvania,” Ron Dvir, president and CEO of Allentown.-based Palram Americas, said in the release.
Palram Americas is the U.S. subsidiary of Palram Industries Ltd. of Ramat Johanna, Israel, a global sheet manufacturer with about $200 million in annual sales.
Palram products are used in end markets including home improvement, construction, architectural advertising, agricultural, glazing, and fabrication.
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