CHEMICAL UPDATE
SEPTEMBER 2011
McIlvaine Company
TABLE OF CONTENTS
Lonza Extends Tender Offer for Arch Chemicals
BMW, Others Investing in Carbon Fiber
DuPont Delivers Strong Results in Second Quarter; Increases 2011 Earnings Guidance
BASF Breaks Ground on Additive Plant in Bahrain
Lanxess Invests €90m in Plastic Materials Business
Mitsubishi Adding PET Film Capacity in S.C.
Polyplex Adds Film Lines in US and Thailand
Eastman Announces Second Plasticizer Capacity Expansion at Estonia Site
Eastman Acquires Scandiflex to Expand Plasticizer Business
Brenntag Acquires Specialty Chemical Distributor Multisol Group Limited (UK)
Lonza Group Ltd (SIX: LONN), one of the world’s leading suppliers to the life science industries, announced that its subsidiary LG Acquisition Corp. has extended the expiration date for its previously announced tender offer for 100 percent of the outstanding shares of common stock of Arch Chemicals, Inc. (NYSE:ARJ). The tender offer is at a price of USD 47.20 per share in cash, without interest and less any required withholding taxes pursuant to a previously announced merger agreement, dated 10 July 2011, by and among Arch Chemicals, Lonza and LG Acquisition Corp.
The tender offer has been extended because certain conditions to the tender offer are not expected to be satisfied as of the previously scheduled expiration date. In particular, the tender offer remains subject to antitrust clearances in France and the United States. In Germany, Lonza obtained antitrust clearance from the Federal Cartel Office on 9 September 2011.
Lonza has been advised by BNY Mellon Shareowner Services, the Depositary for the tender offer, that as of the close of business on 9 September 2011, shareholders of Arch Chemicals (1) had validly tendered and not withdrawn approximately 10,498,320 shares and (2) had instructed to be tendered under Arch Chemicals’ CEOP 401(k) plan an estimated 741,055 shares, together representing approximately 44.2% of the outstanding shares of Arch Chemicals common stock.
Carbon fiber, two-thirds the weight of steel yet five times stronger, is increasingly finding its way into automobiles. If a means can be found to use it in mass-production vehicles, it would result in dramatically improved fuel economy without resorting to exotic new fuels and engine technologies. Replacing the steel in a car with carbon fiber would shave hundreds of pounds off its weight.
Automakers are betting they can make it work, BMW in particular. BMW chairman Norbert Reithofer recently opened a new co-owned factory in Washington state that manufactures carbon fibers.
Carbon fiber consists of thin strands of carbon woven into a yarn that in turn can be made into cloth. The cloth in turn is then laid over a mold and stiffened with resin to produce a sheet of material with remarkable properties.
Carbon fiber has found its way into fishing rods and tennis rackets, and in larger quantities into airplanes like the Boeing 787 Dreamliner and the bodies of Formula One racecars. A couple of high-end performance cars like the BMW M6 and Chevrolet Corvette have carbon fiber body panels, and the material is used for interior trim in the place of wood veneers or aluminum.
But high-volume applications have eluded carbon fibers. For one thing, the material is expensive. According to published estimates, carbon fiber costs about $10 a pound. That's a lot cheaper than the $150 a pound it cost a decade ago but still ten to 20 times more than a pound of steel.
For another, the construction process is laborious and can't easily be scaled up. Curing time can take hours. Moreover, carbon fibers can't be recycled because carbon composites don't corrode.
That hasn't deterred BMW, which is investing $100 million to build a carbon fiber factory in Washington State, 180 miles east of Seattle. The factory is co-owned and operated by a German company, SGL Carbon SE. Production of carbon fiber thread is starting this month. The fibers will be processed into lightweight fabrics at a second joint venture site in Germany.
Other German automakers are following. Volkswagen, maker of Audi, has bought a 9.9% stake in the SGL venture. Mercedes-Benz is building its own manufacturing facility in Germany in cooperation with a Japanese company. Mercedes has a goal of reducing vehicle structure weight by 10% with each succeeding generation, according to Bloomberg.
All three companies have some catching up to do. Tiny McLaren, based in the U.K., plans to use a carbon fiber chassis as the basis for 1,000 MP4-12C sports cars it plans to build this year. Base price: $231,400.
DuPont reported second quarter sales increased 19 percent to $10.3 billion, with 11 percent higher local prices, 2 percent higher sales volume, 3 percent currency benefit and a 3 percent net increase from portfolio changes.
Sales in developing markets grew 29 percent and represent 30 percent of total sales.
Strong performances in Agriculture, Performance Chemicals and Safety & Protection, and the acquisition of Danisco contributed to a 20 percent increase in segment pre-tax operating income, excluding significant items.
The company increased its full-year 2011 earnings outlook, excluding significant items, to a range of $3.90 to $4.05 per share. The increase reflects strong second-quarter results, the expectation for continued global economic growth and about $.05 per share full-year impact from Danisco on an underlying basis. Prior guidance was a range of $3.65 to $3.85 per share, excluding the impact of Danisco.
"Our strong second-quarter sales growth across all segments and regions resulted from consistent global execution and customer-focused innovation," said DuPont (NYSE: DD) Chair and CEO Ellen Kullman. "We are increasing our earnings outlook for 2011 based on strong performance year-to-date and confidence in our business plans for the second half of the year. Longer term, we expect additional compelling growth opportunities across our businesses stemming from science-powered innovations and collaboration, including the integration of Danisco's world-class enzymes, fermentation and specialty food ingredients capabilities with DuPont's strong industrial biosciences and nutrition & health offerings."
BASF has broken ground on a previously announced multi-million dollar plastic additives facility at the Bahrain International Investment Park, with production of customer specific antioxidant blends (CSB) to start in 2012. The company said the investment was spurred by a supply agreement with Astra Polymer, the Damman, Saudi Arabia based supplier of masterbatch, additives, and compounds, as well as the opportunities presented by the countries of the Gulf Cooperation Council (GCC), which represent one of the fastest growing sectors of polyolefin production worldwide.
BASF describes the planned plant as "worldscale" calling it a "significant addition" to its existing plastic additive plants around the world in Asia, Europe, and the Americas. Production will occur across multiple lines with a high degree of automation, according to BASF. The company said the new operation will become one of the world's largest CSB plants with an annual capacity of about 16,000 metric tonnes, according to a July release. The company said this investment reflects its strong commitment to the plastic additives industry, following its acquisition of Ciba in 2009.
John Frijns, BASF's plastic additives head, said his company's interest in the region is tied to its growth prospects and ongoing evolution. "The expected growth of the plastic polymer production in Middle East will get an additional push by increasing efforts to grow the plastics downstream market locally."
Ciba and Astra Polymer originally had plans to form a joint venture to produce CSB in the Middle East Region, but after acquiring Ciba, BASF and Astra decided in July 2010 to discontinue JV plans. At the time, BASF noted that the termination of the joint venture plans would have no impact on the existing tolling agreement between itself and Astra to produce customer specific antioxidant blends for the region.
Lanxess recently announced a series of investments, totaling €90m, European Plastics News reports. This covers new polyamide compounding facilities in the US and India, as well as the expansion of upstream production facilities caprolactam (€35m) and glass fibres (€15m), both used in its semi-crystalline products (SCP) business unit, in Antwerp.
Since breaking away from Bayer in 2004, Lanxess has increased caprolactam (CPL) capacity to 220,000 tonnes per year from 50,000 tonnes per year. The company repaired its glass furnaces in 2010 – and will do again in 2013 – to increase annual capacity by 10% to 66,000 tonnes.
One third of the caprolactam and glass fibre products are sold to external customers and the other two-thirds are used by Lanxess itself in its PA and PBT SCP compounds.
SCP business unit head Dr Michael Zobl said this gives customers security of supply - important in a “world of volatility”.
Outside Europe, Lanxess is investing €10m each in new plants in North Carolina, the US, and Gujarat, India. Each of these new two plants will have 20,000 tonnes per year compounding capacity when they come on stream in 2012 and will draw upon polyamide 6 polymerised at the Krefeld-Uerdingen plant in Germany from caprolactam made by Lanxess in Antwerp.
The company is considering investing in a compounding site in an unspecified South American country but has yet to make a final decision.
In terms of existing plants, Lanxess is investing €10m each in plants in Hamm-Uentrop, Germany and Wuxi, China to increase capacity. In Wuxi, Lanxess has added a third line to increase compounding capacity to 60,000 tonnes per year, up from 20,000 tonnes per year in 2005.
COO Dr. Werner Breuers said the market for high-tech plastics was worth €7bn in 2010 and that the market for high-tech plastics in cars is expected to grow 7% to 2020. Automotive applications is an important market area for Lanxess, accounting for around 50% of sales of SCP compounds (20% go to electrical and electronics applications).
One recent automotive innovation was frontends, made from a glass fibre reinforced PA6 and metal hybrid, which are 40% lighter than conventional all-steel frontends.
Hartwig Meier, head of SCP product and application development, said there are now 60 million hybrid frontends on more than 70 car models, including the new 2011 Mercedes Benz A- and B-Class cars.
The company has also developed an all-plastic frontend for the new Audi A8 car, comprising formed polyamide composite inserts made from continuous fibre reinforced “organic sheet”.
Mitsubishi Polyester Film Inc. has begun a $20 million upgrade at its plant in Greer, South Carolina. The addition will increase the factory’s capacity for making polyester films as well as providing enhanced capability for new products.
“We’re adding new technology to one of our current lines,” spokeswoman Rose Marchek said in a Sept. 15 telephone interview. “We’re not increasing our [Mitsubishi] employees, but we are increasing the number of on-site contract employees for the duration of the project”, Plastics News reports.
She would not elaborate on the machinery being added as part of the upgrade.
Additions to the Greer facility will be completed in late 2012, Dennis Trice, president and chief operating officer of Mitsubishi Polyester Film, said in a news release.
The upgrade comes on top of Mitsubishi’s $10 million project, launched late in 2010, to roll out its Reprocess Sustainable Liner Program.
That program is a closed-loop recycling process that makes recycled PET pellets out of the inline silicone-coated release films that are used as dispensing liners for labels placed on consumer goods including beverage bottles and personal care products.
Mitsubishi has invested more than $200 million at its Greer facility over the past 10 years, Trice said. Mitsubishi bought the 1 million-square-foot plant in 1998 from Hoechst Celanese Corp., with whom it had operated a joint venture, Hoechst Diafoil Co., at the site.
Marchek said the latest film capacity increase was not a reaction to recent decisions by Indian firms such as Uflex Ltd. and Polyplex Corp. Ltd. to set up PET film production in the United States
“They’re commodity producers, and we’re trying to get into new, high-end products that are more technical,” Marchek said.
Mitsubishi Polyester Film is a subsidiary of Tokyo-based Mitsubishi Plastics Inc., which is part of the Mitsubishi Chemical Holdings Group, one of the largest chemical companies worldwide with annual sales of $40 billion.
Polyplex (Thailand) Public Co. Ltd. has US $202 million in investments under implementation in Thailand and the United States scheduled for completion over the next two financial years.
The investments include PET thin film line and PET resin line in the United States to be completed in fiscal year 2013-14. Polyplex said its board approved the relocation of a film line from Turkey.
This was “a strategic decision to further diversify our manufacturing base and capture the growth potential in the North American region by becoming a preferred on-shore supplier,” the company announced.
In Thailand, it is working to complete a silicone coating line in fiscal year 2012-13; and a PET thick film line and polypropylene blown film line in Thailand in 2013-14.
These investments will help the company generate higher returns for shareholders, the firm announced, adding that new applications like touch-screen panels would drive growth of thick PET film.
Bangkok-based Polyplex has projected between 8-10 percent annual growth in demand for its products.
Plans Additional Expansions for Kingsport and Chestertown Sites
Eastman Chemical Company recently announced a second expansion of its Benzoflex plasticizer line at the Kohtla-Järve, Estonia, site. The expansion will increase Benzoflex capacity at the site by an additional 11,000 metric tons and is expected to be completed by the end of second quarter 2012.
The company also announced plans for expansion of the Benzoflex plasticizers and Admex polymeric plasticizers lines at its Chestertown, MD and Kingsport, TN sites. The total capacity for the expansions in North America is approximately 9,000 metric tons and is also expected to be completed by the end of second quarter 2012.
"These expansions reflect the continuing growth in demand for alternatives to traditional phthalate products," said Heidi Barnes, Oxo and Plasticizers business director. "The additional capacity will allow our Performance Chemicals and Intermediates segment to satisfy increasing customer demand for non-phthalate plasticizers."
A benzoic acid derivative, Benzoflex is used in coatings, adhesives, sealants and caulks, and is also used to provide flexibility to PVC in a wide variety of applications, including vinyl flooring. Admex plasticizers are used to enable flexible vinyl compounds to compete with rubber and thermoplastic elastomers in a variety of applications, including PVC-based adhesive tapes, conveyor belts, gaskets and hoses. Benzoflex and Admex plasticizers are non-phthalates for manufacturers who are looking for sustainable alternatives to traditional phthalate plasticizers.
"Around the world, customers continue to preferentially select Eastman's non-phthalate plasticizers," said Joost Berting, managing director, Europe, Middle East and Africa region. "These capacity expansions for our Benzoflex plasticizer product line are a demonstration of our commitment to grow with our customers in a sustainable way both in established markets as well as fast expanding regions”
Acquisition enables growth in fast expanding Latin America region
Eastman Chemical Company (NYSE:EMN) announced that it has acquired Scandiflex do Brasil S.A. Indústrias Químicas, a manufacturer of plasticizers located in Mauá, São Paulo, Brazil. The acquired Scandiflex plasticizer business and manufacturing capabilities are now part of Eastman’s Performance Chemicals and Intermediates (PCI) segment. Terms of the transaction were not disclosed.
With 2010 sales revenue of $54 million, Scandiflex’s manufacturing capabilities and customer relationships in Brazil will enable Eastman to accelerate growth of its PCI segment’s non-phthalate plasticizer business in the Latin America region. In addition to regional diversification of both sales and manufacturing, Scandiflex also brings several complimentary non-phthalate products to Eastman’s broad portfolio of plasticizer products.
“This acquisition is an important next step in our global growth strategy and positions us to grow as demand increases in Latin America for non-phthalate plasticizer products,” said Ron Lindsay, executive vice president, performance chemicals and intermediates and fibers. “I am confident that Scandiflex’s strong customer connect and reputation as a reliable supplier in the Latin America market will provide us additional opportunities for future growth in this fast expanding region.”
A global company headquartered in Kingsport, Tenn., USA, Eastman had 2010 sales of $5.8 billion.
•Brenntag acquires Multisol Group Limited, the holding company of the Multisol Group which is engaged in the distribution of high value specialty chemicals
•Multisol provides a further expansion of our product portfolio into lubricant additives and high quality base oils
•Multisol expands Brenntag's mixing and blending capabilities
•Multisol's geographic presence in Central and Eastern Europe and Africa complements Brenntag's existing infrastructure and logistics network to drive sales growth
With the acquisition of Multisol Group Limited, Brenntag further develops its market position in the distribution of specialty chemicals with focus on lubricants and base oils including mixing and blending capabilities. Multisol is a specialist in the distribution of lubricant additives and base oils in Europe and Africa working together with some of the world's largest producers. For the year 2012, the company expects sales of GBP 238 million. The transaction provides a further expansion of our product portfolio into lubricant additives and base oils and, at the same time, increases Brenntag's capabilities in mixing and blending.
Steven Holland, CEO of Brenntag, comments: "Multisol seamlessly fits into our strategic approach to enlarge our product focus of specialty chemicals including value added services in our core markets in the UK, Western Europe, Central and Eastern Europe and Africa."
The key industry for lubricants is the automotive sector which faces increasingly stringent emissions standards, especially in the EU and North America. Fuel economy requirements and improved durability are driving the growth of high specification lubricants. Multisol works closely with its customers and suppliers providing strong blending expertise as well as the distribution of both high quality base oils and lubricant additives. As such it is ideally positioned to benefit from these long-lasting industry trends. Multisol's excellent market position is reflected by internationally renowned suppliers.
Multisol operates in various geographic end markets across Europe and Africa with nearly 170 employees, thus ideally complementing Brenntag's existing distribution network and enlarging its formulation as well as mixing and blending capabilities. At the same time Brenntag expects high synergies from the transaction, both in cross-selling opportunities and further efficiency improvements. By combining sales activities in the UK, Western Europe, CEE and Africa and the cross-selling of Brenntag's existing product portfolio to Multisol's customer base, the companies aim for continued growth in existing and new markets.
Paul Oliphant, CEO of Multisol will together with his board colleagues continue to lead the operating business of Multisol. "We are pleased to become an important part of such a dynamic company. Multisol has grown significantly over the years and being part of the Brenntag global network will provide us with the assets to support our growth opportunities and improve our service to both our customers and suppliers", he comments.
The completion of this acquisition is subject to certain merger control clearances which are expected to be obtained during the 4th quarter of 2011.
McIlvaine Company
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