Hexion Chemicals to Back out of Huntsman acquisition deal
Hexion Specialty Chemicals Inc. is seeking to cancel an agreed $10.6 billion purchase of the U.S.-based chemicals producer Huntsman Corporation.
According to Huntsman, the actions “are inconsistent with the terms of the merger agreement and the obligations to Huntsman and its shareholders,” and “appear to be a blatant attempt to deprive the shareholders of the benefits of the merger agreement that was agreed to nearly a year ago”.
Huntsman’s net debt has increased and its earnings were lower than expected since the companies agreed to the takeover in July, Columbus, Ohio-based Hexion said in a suit filed yesterday in Delaware Chancery Court in Wilmington. The capital structure for the combined entity is no longer viable and would render it insolvent, the company said.
“The financing for the acquisition is predicated on a certain level of financial performance and, given the increase in Huntsman’s total debt and decrease in earnings, Hexion does not believe that the transaction can be completed,” Hexion Chief Executive Officer Craig O. Morrison said in a statement.
Chancery judges decide whether a suitor can terminate a merger by determining if the cause of a company’s worsening results is deeper than a couple of bad quarters.
Hexion also said it shouldn’t have to pay Huntsman an agreed $325 million fee to end the merger because Huntsman’s financial deterioration constitutes a “material adverse effect” under their agreement. The case is Hexion Specialty Chemicals Inc. v. Huntsman Corp., CA3841, Delaware Chancery Court.
Comments: Huntsman Corporation once rebuffed the offer from Access to increase its value. Hexion’s offer was accepted based on projections presented a year ago for the Huntsman expected earnings versus debt served.
The last year’s worsening industry-wide performance related to fluctuating oil prices and increasing debt of the organization essentially makes the deal less attractive a year later.
Huntsman Corporation is long known for speculations and financial dealings – e.g., Starting Huntsman Corporation based on borrowed raw materials from Arco Chemicals, to the speculation of Rexene take over. Independent of what the result will be, Huntsman will go through another major re-organization and speculation.
At this stage of the game, it is hard to judge whether this is Hexion’s counteroffer and/or pre-merger jitters.
LyondellBasell to increase its global PP compounding capabilities by more than 30% by end of 2009
LyondellBasell Industries has announced plans to expand its global polypropylene (PP) compounding capacity to 1.2 million tons per year by the end of 2009, which represents a growth rate of more than 30 percent.
To address rapidly expanding needs in the Asian region, LyondellBasell’s Advanced Polyolefins (APO) business has recently relocated its global headquarters to Hong Kong.
According to the company, a new 15 KT plant in Guangzhou, China will come on stream in the next few months in addition the company’s Saudi Polyolefins Company joint venture is currently constructing a new compounding plant in Damman, Saudi Arabia.
Further expansion of the company’s existing sites in Suzhou, China; Rayong, Thailand; and Ensenada, Argentina is planned. The company said that by 2010, there will be a total of 18 PP compounding plants on four continents.
Comments: Compounding is the best strategy for downstream value capture for PP compared to all other thermoplastics. Lyondell-Basell from its origins in Montedison-Equistar technology and experience knows it very well.
PP made the largest in-roads based on compounding. Himont (the core of Lyondell-Basell) recognized this early on and acquired Republic Plastics one of the three major independent PP compounders in 1988 and expanded the markets.
With the recent acquisition of Dexter-Solvay- Solvay Engineered Polymers, they have expanded their position. Following the Global trends – going to China, the Middle East, and India is more important for PP compounding than most other plastics.
LyondellBasell is continuing to reorganize and optimize its assets. One of the strategies seems to improve its ability to serve all regions in the world through its compounding facilitates. The company is focusing on adding assets in lower-cost regions with proximity to demand centers in Asia. In recent years the company has improved its integration into feedstock and compounding via acquisition or expansions.
Sipchem scraps its plans to build crackers in Saudi Arabia
Saudi International Petrochemical Co (Sipchem) announced that it will not build a 1.3 million tons per annum cracker in Saudi Arabia. This was decided due to major challenges on costs, schedule, availability of qualified contractors, and financing issues. Besides the cracker, Sipchem has also dropped plans for low-density polyethylene (LDPE), high-density PE (HDPE), and polypropylene (PP) plants that were part of the original project configuration.
Instead, the company will secure ethylene and propylene for the derivative projects through an arrangement with existing crackers at the same location. Jubail houses crackers operated by Sabic’s Petrokemya, Kemya, Sadaf, and Sharq. New cracker projects at Al-Jubail include those by Sharq, National Chevron Philips (NCP), Saudi Ethylene and Polyethylene Co (SEPC), and Saudi Kayan Petrochemical Co.
Sipchem plans to utilize the surplus ethylene and propylene at Al-Jubail under tolling arrangements. As the crackers at Al-Jubail are not fully utilized; no additional investment will be incurred at any of the crackers to provide ethylene and propylene to Sipchem. Sipchem, which has received a gas allocation for its cracker project, will focus on differentiated products which include ethylene vinyl acetate (EVA), acrylonitrile (ACN), methyl methacrylate (MMA), polymethyl methacrylate (PMMA), polyacetals and polyvinyl acetate (PVA), sodium cyanide and carbon fiber.
Comments: The capital costs for olefins and polyolefins plants have increased significantly in the last few years, especially in the Middle East. Sipchem seems to have adopted a unique strategy to decrease its cost while maintaining feedstock advantage by using excess olefins capacity in the region. In the downstream projects, Sipchem has continued with its innovative approach and has decided to shelve the polyolefins project and focus on new opportunities such as acrylonitrile, polyacetals, MMA, PMMA, and EVA. These products will allow Sipchem to achieve differentiation and compete with products that have never been produced in the region. We anticipate an increase in such complexes as the region matures from being a supplier of commodity products to differentiated commodities and downstream products.
Sumitomo Chemical creates lightweight hybrid-molded PP foamed sheet
Sumitomo Chemical has created a polypropylene extruded foamed sheet that promises significant weight reduction for automotive components. It achieved this with its new, original hybrid molding technology and improved foamed-sheet-forming process, which also allows the simultaneous molding of ribs and clips.
The new foamed sheet has higher stiffness than its ordinary counterparts and provides weight savings of up to 60% compared with non-foamed (solid) products.
The Osaka-based company recently developed its Back Molding technology, which combines vacuum forming with injection molding, and its Foam Expansive Molding technology, in which the foam extrusion in vacuum forming is carried out in the directions of both the upper and lower molds.
These two technologies allowed it to overcome problems such as poor product strength previously faced by PP foamed sheets, which are made by vacuum forming and have higher foaming ratios than injection-molded sheets, thus holding the potential to reduce the weight of automotive parts. It, therefore, was able to achieve the significant lightweight that was impossible with previous technologies.
The company plans to market PP-foamed-sheet products made using these technologies through group company Sumitomo Plastics, targeting automotive interiors such as door trims.
Comments: Insitu foaming of PP has been practiced for the last two decades but was not considered cost economical. The first use of insitu foaming was used in developing PP soft drink bottle caps.
This is a step in the right direction by Sumitomo Chemical – to achieve the significant light-weighting that was impossible with previous technologies. Weight reduction of automobiles – especially passenger cars has been a top priority by the auto industry worldwide not only to save the overall cost but most importantly to increase the fuel efficiency of the new vehicles, especially at the current – very high fuel price. Weight reduction of plastic components – an elusive holy grail can be reached by introducing new materials based on nano-composites that are too expensive. The other viable option is to fabricate the plastic parts more efficiently using advanced technologies such as the “hybrid molded-PP sheets” by “Back Molding” technology as demonstrated by Sumitomo for automotive interior parts – door trims. By combining two different fabrication methods – vacuum forming with injection molding and the Foam Expansive Molding technology, Sumitomo Plastics eliminated the poor product strength previously encountered by typical PP foamed sheets, thus holding the potential to reduce the weight of automobiles. This novel approach has the potential to reduce the overall cost and as well increase the fuel efficiency of the new vehicles, hopefully, sooner than later.
Russian companies plan for more investments in polyolefins
Sterlitamak Petrochemical located in the Republic of Bashkortostan on the Volga plans to invest RUR422.8mn ($18mn, or EUR 11.5 million) to revamp production, 180% more than in 2007. It intends to complete the construction of facilities producing the Agidol-110 stabilizer for different kinds of rubber, polyethylene, polypropylene, and polyester, launched in 2007. In 2007, the company invested about RUR 68.3 million ($2.9mn) which has been estimated at RUR450mn ($19mn, or EUR12.2mn). Production is to be launched in 2009.
The government of Tobolsk in West Siberia’s Tyumen Region has held a public hearing of an investment project of Tobolsk-Polymer (part of the SIBUR Group) to build a propane dehydrogenation and polypropylene (PP) complex, and also data on the environmental impact of this production. In April 2006, SIBUR set up a wholly owned subsidiary, Tobolsk-Polymer, to implement an investment project stipulating propane dehydrogenation and polypropylene production in Tobolsk.
In February 2007, SIBUR signed an agreement with the Tyumen Region’s government on the joint construction of housing for both city residents and workers at the new plant. The first stage of the project is underway, and two 12-story sections of apartment houses are to be commissioned this June.
In August 2007, SIBUR and Fluor, its polypropylene project manager, selected licensers for the project. Following a detailed technical and economic analysis, they chose the propane dehydrogenation technology of a US-based UOP company and the polypropylene production technology of Britain’s INEOS company.
Comments: There will be significant polyolefins capacity in Eastern Europe once all the announced projects are completed. This will also reduce the dependence of the region on imports.
Dow to Idle Latex Plants at Pittsburg, California, and Varennes, Quebec
Dow Chemical announced its plans to idle latex production facilities at Pittsburg, California, and Varennes, Quebec by year-end 2008. The Latex plants are two of six facilities that serve the North American paper, carpet, and performance latex industries. Together, these two plants employ approximately 35 people. Every effort will be made to redeploy as many employees as possible to other roles on their respective sites, but some redundancies will be unavoidable.
Both plants will be fully idled by year-end 2008. Beyond that timeframe, Dow will supply latex from other manufacturing locations across its grid in North America to service customer demand. Since Dow customers are served from a multiple manufacturing grid system rather than from individual sites, Dow anticipates no disruption in supply.
The Pittsburg and Varennes sites are the third and fourth latex sites to be idled by Dow in the past seven months. Dow announced the closure of its latex plant in Freeport, Texas in December last year and last week announced that its King’s Lynn, UK plant would be idled by September 2008.
Comments: The SB Latex will remain one of the core products for Dow Chemical Company, if and when the KPL venture is finalized. The major use of latex is in carpet backing, paints and coatings, and paper coating. All the major end uses fit in with Dow Market-facing platforms e.g., Building Solutions.
The Latex industry in North America has recently seen low growth rates of up to 3% with growth coming mainly from the paper and carpet sectors. In North America paints and coatings are also a major consumer of latex polymers accounting for around 25% of the total demand. Other markets include paper, adhesives, and other smaller applications. In recent years there has been an oversupply of latex products and an increase in raw material costs. This scenario has led to the underutilization of their production plant. Dow chemical move will enable it to lower its production cost and improves its margins.
Petkim gets new owners – plans for new investments
Turkish energy company Turcas plans to invest US$3 bln over the next five years in petrochemicals company Petkim, in which it has recently acquired a 51% stake. The Azerbaijani-Turkish consortium has formally acquired the majority shares of Turkey’s Petrochemical Holding Co. (Petkim). The consortium paid an advance of US$1.6 billion of the US$2.04 billion to acquire 51% of Petkim`s shares. The balance of US$380 million will be paid over the next three years. Petkim was set up in 1965 and opened five factories in the Izmit-Yarimci petrochemical complex in 1970. Then, several other factories were established. The second area where Petkim opened a complex was Aliaga town in the Aegean province of Izmir.
Comments: After so many years of privatization efforts, the company is finally able to do so. Once the change of ownership is completed, the new owners will be able to make changes/investments to improve the overall competitiveness of the company. Petkim is the leading producer of polyolefins and other petrochemical products.
TenCate opens a geosynthetics materials plant in China.
Koninklijke TenCate has opened a new plant in Zhuhai, China, for the production of geosynthetic materials, with a starting workforce of around 150. The facility converts polypropylene to fabric for geosynthetic materials such as Geotube which is used for dike construction and land reclamation. The Asian market is growing strongly and according to TenCate the demand for geosynthetic materials rose by about 20% in the last year. By opening its plant in this area TenCate will benefit from many infrastructural projects and an expansion of road and waterway construction activities in countries such as China and India. The new plant should be contributing to the turnover of TenCate’s Geosynthetics and Grass sector from 2H 2008.
Comments: This decision by TenCate is similar to the trend of more and more converters moving closer to the growing demand regions.
LINPAC Packaging opens its first production plant in China
INPAC Packaging, a division of leading UK-based packaging and supply chain specialist LINPAC Group Limited, has opened its first factory in China. The new facility complements the three existing LINPAC Viscount factories in the People’s Republic.
LINPAC has invested substantially in a modern production plant at Changzhou in Jiangsu province, about 150km from Shanghai, where it will be manufacturing high-quality PVC stretch wrap film for food packaging. Employing 60 permanent staff, the facility has been purpose-built on a 20 000 sq meter site, with the capacity for an extension to 50 000 sq meters if required. It was officially opened on 12 June 2008.
The new Chinese factory reinforces LINPAC’s global presence and continues the company’s rapid development in the Asia Pacific region. It is LINPAC Packaging’s first manufacturing site in Asia which means the division now has production facilities on five continents.
Another LINPAC Group division, LINPAC Viscount, has manufacturing operations for plastic pails and containers at Changzhou, Guangzhou, and Langfang in China, as well as at locations in Malaysia and Thailand.
The latest facility contains two extrusion lines for the large-scale production of PVC stretch wrap. This material is used by food manufacturers, suppliers, and retailers in the manual and automatic wrapping of fresh foodstuffs – in particular for the protection and preservation of meat, poultry, fruit, and vegetables.
In the lead-up to the opening of the plant, two Chinese teams spent time at LINPAC’s manufacturing facility in Pontivy, France – benefitting from its 25 years of experience in the protective food packaging sector. LINPAC Pontivy is the European market leader in the field of stretch film for food.
Comments: China is the fastest growing region for PVC and this is the right move by Linpac to increase market presence and participate in growth markets. As more and more PVC capacity will be built in China, there will be more resin available and the country’s dependence on imports will decrease.
Over the next few years, this could be a trend for most of the converters – participate in growing markets and increase their geographic presence.
PVC-based shower curtains under environmental pressure
A study issued by an environmental advocacy group called the Center for Health, Environment, and Justice found that the “new shower curtain smell” is caused, in fact, by the emission of several toxic chemicals.
According to the study, polyvinyl chloride curtains, better known as PVC shower curtains, contain at least seven substances, methyl isobutyl ketone, toluene, ethylbenzene, acetophenone phenol, xylene, and cumene that are considered to be air pollutants.
Some of these substances could cause damage to the central nervous, reproductive, and respiratory systems, the study says.
However, the specialists consider that the amount of these substances that are found in shower curtains is not large enough to pose any threat to consumers.
During the last few years, more and more companies and retailers have cut back the number of PVC-based shower curtains that they produce or sell, in favor of the more environmentally friendly ethylene vinyl acetate ones. IKEA has been a pioneer in doing this. For the last 11 years, the company hasn’t produced or sold PVC shower curtains in the United States. What is more, the recent trend is to announce to consumers via labeling whether the shower curtain they are planning to buy is made of PVC or not.
According to the advocacy group, all PVC products are bad for the environment and for the health of the people that come in touch with them, but the products that are used to soften the material, like phthalates and organotins, pose even more dangerous since they are both more toxic and quicker to evaporate.
Comments: PVC-based shower curtain is one of the end-use markets of film and sheet applications of flexible PVC. The findings of this study will not significantly change the demand for flexible PVC as there are other factors (inter-material competition from other designs such as glass stalls, and cloth), also involved.
Recently, there has been a trend by retailers to be more proactive and discontinue the use/sale of products that are under environmental pressure even before the FDA or other regulatory bodies announce it to be harmful.
Mazda collaborates with academia for research on bioplastics
Mazda has signed a collaborative research agreement with Hiroshima University to develop a range of polypropylene bioplastics for automotive use from non-food-derived cellulosic biomass. The project will use so-called “second generation” bioplastics manufacturing technology making use of non-edible high cellulose content vegetable matter such as plant stalks or wood shavings.
This will be used to create a range of bioplastics that – unlike current bioplastic resins produced from corn, maize, or sugar cane and beet feedstocks – will not risk competition with food production.
The Japanese carmaker and its academic partners hope to have a cellulosic-derived bioplastics material ready for use in car components by 2013.
The project will focus on designing a process for the production of polypropylene resin with the strength and durability required for car bumper and instrument panel applications. It will involve converting cellulosic biomass to ethanol and then investigating various blends of ethylene and propylene.
Mazda’s previous bioplastic research project resulted in the development of a PLA-based fabric for use in seating and several improved heat resistance compounds. These have been showcased in the Mazda Premacy Hydrogen RE Hybrid concept car, which the company said it hopes to make available in Japan on a lease-hire basis this year.
Comments: The use of bioplastics for non-durable goods should be a higher priority than durable goods. What would be accomplished by developing a plant-based material for a car seat that can last 15 years?
There has been an increased push in the automotive industry towards the use of sustainable materials such as bioplastics. Major manufacturers like Ford and Mazda are looking to use renewably sourced bioplastic materials such as PLA and biobased PU in various applications. The most recent ones include a PLA-based flame-retardant fabric material for upholstery and soy-based PU foams in seating. The current announcement from Mazda goes a step further to seek academic partnerships to develop bio-based PP from cellulosic biomass. Although an ambitious project to undertake, it will provide a significant edge to Mazda (based on perception) and the rest of the industry when available on a commercial scale.
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