Dow to acquire Rohm and Haas for $18.8 Billion
Dow and Rohm and Haas announced a definitive agreement, under which Dow will acquire all outstanding shares of Rohm and Haas common stock for $78 per share in cash. The acquisition of Rohm and Haas will make Dow the world’s leading specialty chemicals and advanced materials company, combining the two organizations’ best-in-class technologies, broad geographic reach, and strong industry channels to create an outstanding business portfolio with significant growth opportunities.
Financing for the acquisition includes an equity investment by Berkshire Hathaway and the Kuwait Investment Authority in the form of convertible preferred securities for $3 billion and $1 billion respectively. Debt financing has been committed by Citi, Merrill Lynch, and Morgan Stanley who acted as financial advisors on the transaction.
Comments: There was a lot of speculation regarding what Dow will do with the cash infusion from the KPIC deal. The acquisition of Rohm & Haas was least speculated and this news comes as a surprise to the industry. Rohm & Haas has been very successful in competing in specialty markets and this acquisition will help Dow reach its goal of being a specialty company. Rohm & Haas is a one-molecule company based on acrylic acid.
The company has explored all possible markets using acrylic acid. The new Dow is developing market facing interface and Rohm & Haas management/growth style will be complimentary to this new structure.
The Positives:
1. Rohm & Haas’ chairman Mr. Gupta is the most written-about CEO in the world, only behind Mr. Jeff Lipton of Nova and Peter Huntsman of Huntsman. Rohm & Haas’ public image and marketing savvy are exceptional.
2. Rohm & Haas has always been market and end-use oriented in all their activities just by separating the R&D and production from public view and getting involved in the markets through other channels. Rohm and Haas’ strategy would help Dow in developing its “new” strategy of market-facing platforms.
3. Rohm & Haas took a great initiative to move to China and India for technology development – a process Dow is still going through.
The unanswered questions:
1, How efficiently can Dow use the limited experience of Rohm & Haas’ – one molecule experience to more than 200 molecules at Dow Chemical Company? Rohm & Haas is an acrylate-based organization with limited experience in other molecules and/or product chains
2. Rohm & Haas’ has very limited experience in handling other plastics and/or chemicals – performance or otherwise.
3. The debate on the price paid for an organization that puts all its prospects on future growth – which Dow already has ample plans for remains inconclusive. Depending purely on R&H’s past performance and current trends – it will take at least five more years of high growth just to pay for the purchase price – according to some Wall Street analysts.
Overall, it appears that there is a good fit between Dow and Rohm & Haas.
Rohm & Haas will be stronger as a part of Dow, while the stockholders and owners of Rohm Haas can enjoy the windfall.
Dow and PIC of Kuwait joint venture continues to progress – announces CEO, company name, and global HQ Location
Dow Chemical and Petrochemical Industries Company (PIC) of the State of Kuwait, a wholly owned subsidiary of Kuwait Petroleum Corporation (KPC), continue to make progress on their $11 billion proposed 50:50 joint venture. Today the two companies named James R. Fitterling the chief executive officer of the new market-leading global company – K-Dow Petrochemicals (KDP). Dow and PIC also announced the selection of Michigan as the location of the world headquarters for the new joint venture, subject to the approval of state and local incentives and the completion of definitive agreements, customary conditions, regulatory approvals, and transaction close, which is anticipated in late 2008.
Fitterling is currently the business group president for Dow Basic Plastics and a member of the Company’s Management Committee and Business Operations Committee. He has held a variety of key leadership positions during his 24-year career with Dow. Fitterling will become CEO when the joint venture begins operations.
The JV selected Michigan for Headquarters. The city location for the headquarters is still to be determined; however, the venture will be located in southeast Michigan, pending final incentive approvals, which offers convenient international airport access as well as a broad range of educational opportunities and culturally diverse communities. The total number of employees located at the headquarters site is expected to expand to 800 employees over the next several years.
The name K-Dow Petrochemicals (KDP) reflects the combined strengths of the JV partners that together will create a market-leading, global petrochemicals company. Dow’s strengths are its recognized brand and franchise related to product and market leadership — including its number one position in polyethylene, ethylene amines, and ethanolamines — as well as technology development and operational expertise.
K stands for Kuwait and represents both Petrochemical Industries Company (PIC) of Kuwait’s feedstock position and commitment to global petrochemicals growth and the position of PIC’s parent company Kuwait Petroleum Corporation (KPC) as one of the world’s top-ten energy/hydrocarbons companies.
The venture will manufacture and market polyethylene (PE), ethylenediamine, ethanolamines, polypropylene (PP), polycarbonate, and related licensing and catalyst technologies. PE and PP comprise more than half of the world polymer demand. PE is the most widely used of all plastics and can be found in everyday products from food packaging, milk jugs, and plastic containers to pipes and liners. PP is a versatile plastic used in fibers, packaging films, non-wovens, durable goods, automotive parts, and consumer applications. Polycarbonate is an engineering thermoplastic used in applications such as optical media, electrical, and lighting. Amines are a family of chemicals with a broad range of properties, used in various applications from wood treating and pharmaceutical processing, to coatings and consumer products.
Comments: The next phase of the Kuwait Petro Dow is taking shape. Kudo(w)s to Dow for picking the name.
K Dow will finally give the polyolefins groups at Dow the freedom, to invest in new developments and continue to flourish under the new umbrella. As a long-term observer of polyolefins – this will also solidify the international presence of Dow as a Global leader in polyolefins.
Middle East may have the production facilities – but the real success will come from market understanding, innovations, and experience which are Dow’s forte.
DuPont to expand compounding capacity in China for engineering resins
DuPont announced an expansion of compounding capacity for its range of DuPont™ Zytel® nylon 6,6 resins and DuPont™ Zytel® HTN high-performance polyamide resins at its manufacturing site in Shenzhen, China. The start-up of production is planned for the second quarter of 2009. When combined with a recently announced expansion for Zytel® resins in Ulsan, South Korea, the result will be an additional 65,000 metric tons of capacity to serve growing markets in Asia.
In addition to manufacturing capability, DuPont also has invested in providing innovative technical solutions to engineering resin customers. The DuPont R&D Center in Shanghai is equipped with the full spectrum of Computer Aided Design and Computer Aided Engineering capabilities. These enhanced molding and testing capabilities will support development work for customers within a shorter period. In addition, the DuPont Automotive Center in Nagoya, Japan, is collaborating with customers to provide new solutions for auto system applications.
Comments: Dupont is also joining the rest of the US plastics industry – “going where (China!) the growth is”. This is indeed a good move by DuPont in line with its overall strategy to respond to long-term growth in demand for engineering polymers in Asia. DuPont Engineering Polymers’ continued investment in the Shenzhen site demonstrates its commitment to reinforcing its position as the leading supplier of engineering plastics globally and in Asia. We expect that the market in China will continue to grow at high rates. This investment in China will allow DuPont Engineering Polymers to become more competitive as a local source of supply.
BASF to invest in a new plant for the manufacture of PE waxes in Germany
In the fourth quarter of 2008, BASF will begin construction of a second oxidizing plant for the production of synthetic waxes at its Ludwigshafen, Germany, site. From 2010 the plant will produce several thousand metric tons of oxidized waxes using a process developed by BASF. This is double the current production capacity. The waxes are used primarily in plastic processing.
As in the existing plant, which has been in operation for more than ten years, the raw material − low-density polyethylene waxes (PE waxes) − will come from the site’s polymerization plants. Thus, the new plant will fit perfectly into BASF’s Verbund, the company’s integrated raw materials and energy system, at the Ludwigshafen site.
Comments: Polyethylene waxes are considered one of the fastest growing types of waxes amongst different types. Over the last few years, on-purpose production of PE waxes has increased and this is expected to continue. The major applications of PE waxes include: (1) masterbatches, (2) PVC – lubricant, (3) asphalt, (4) rubber processing, and others.
PolyOne establishes presence in India – Forms PolyOne Polymers India Pvt. Ltd.
PolyOne Corporation announced that it has formed PolyOne Polymers India Pvt. Ltd. to import, manufacture and sell PolyOne products in India and neighboring markets.
The Company’s new production and lab facility, which will be located in Mumbai, India, provides strategic regional access to many large OEMs and polymer processors. Construction at the facility is expected to begin later this year, and color masterbatch production lines and a color lab are scheduled to commence operations in 2009.
According to the company, the new manufacturing facility and color lab will help ensure responsiveness to customer needs by providing locally available materials and rapid turnarounds.
PolyOne’s initial focus in India will be on producing colorants and providing technical support. Once that foundation is established, we will work with India’s key OEMs to gain specifications for PolyOne’s full bundle of materials and services, which include color and additives; specialty engineered materials; thermoplastic elastomers (TPEs); low smoke and fume, zero halogen compounds (LSFOH); and other specialized products.
Comments: The growth of the Indian Economy and the increase in the middle-class population has attracted many foreign companies to the region. India’s middle class is 300 million and rising, and the annual GDP growth rate is 8%. In recent years the production of various consumer goods and the growth of the automotive industry has influenced the demand for compounded plastic resin. PolyOne is one of the largest compounders and a producer of specialized polymer materials. The company has close to 51 manufacturing facilities and 13 warehouses in 20 countries; it has operations in North America, South America, Europe, and Asia. PolyOne’s entry into the Indian market will give the company an entry to the new fast-growing consumer base.
SABIC Europe announces plans to streamline its aromatics operations
SABIC Europe announced plans to re-structure its Aromatics operations based in Teesside, UK following a wide-ranging review of the long-term viability of the business.
The plans involve the closure of the Aromatics 2 unit at the SABIC UK Petrochemicals North Tees Site near Seal Sands and the Paraxylene plant at the Wilton Site near Redcar. The plans also include an upgrade of the remaining Aromatics 1 plant at North Tees.
Due to the closing of the plants, SABIC Europe will be restructuring its Aromatics product portfolio. On Teesside, the company said that SABIC UK Petrochemicals remains fully committed to its Olefins Cracker operations at Wilton and Cyclohexane production at North Tees. The current construction of the new world-scale Low-Density Polyethylene (LDPE) plant and the possible upgrading of the Aromatics 1 plant are important factors in helping to underpin this.
The proposed closure of the Aromatics 2 and Paraxylene units is expected to affect approximately 200 operational and support positions. The main impact of this will be at the manufacturing facilities on Teesside, but the numbers also include some job reductions in SABIC Europe’s support functions in The Netherlands. It is currently envisaged that the proposed closures will take effect by the end of 2008.
Comments: SABIC has acquired the European assets via the acquisition of DSM in 2002. This decision by the company to shut down some of its assets could be to maintain its competitiveness. Amongst the different aromatics, benzene is the key raw material for SABIC due to its presence in the polycarbonate markets. Hence, the closure of paraxylene units will not impact the business significantly.
Saudi Aramco and SABIC reach a polyolefins marketing agreement in China
Under a vital cooperation deal signed between Saudi Aramco Sino Company and Sabic Shenzen Trading Company, the latter will market Saudi Aramco Sino Company’s 25% share of polyolefin products produced by the Fujian Refining and Petrochemicals Company of China. This deal is expected to further incorporate technological and industrial aspects between the two giants – first in the field of oil industries and the other in the area of the petrochemical industry – to boost national industrial development and maximize the GDP. The deal spells an additional plus for Sabic as its China-based subsidiary receives a right to market polyolefins abroad, thereby adding value to the Gulf kingdom’s internal and external investments. As per a higher authority in Sabic, the Saudi Aramco-Sabic agreement is a huge step in the history of Saudi industrial development.
In the previous year, Fujian Refining and Petrochemicals Company of China was established as a joint processing venture between Saudi Aramco, Sinopec, the government of the Fujian district of China, and ExxonMobil.
Comments: SABIC has been expanding its presence in the global markets via acquisition and alliances. The acquisition of DSM and Huntsman (in Europe) allowed the company to establish a market position in Europe while the acquisition of GE Plastics allowed the company to establish a market position in the US. This deal will allow the company to position itself in China – this is a vital part of the strategy as China is one of the largest importers of polyolefin resins. Both Aramco and SABIC have also made announcements regarding India being an important strategic location.
SABIC is the oldest polyolefin producer in Saudi Arabia and therefore will be looking to form strategic alliances in different regions of the world before the onslaught of the new capacity by 2012.
Dow and NREL collaborate to convert biomass to ethanol and other chemical building blocks
Dow Chemical and the U.S. Department of Energy’s National Renewable Energy Laboratory (NREL) today announced an agreement to jointly develop and evaluate a process that will convert biomass to ethanol and other chemical building blocks. The collaborative effort demonstrates both Dow and NREL’s commitment to delivering sustainable solutions to the nation’s current energy challenges by reducing dependence on foreign oil.
A mixed alcohol catalyst from Dow is seen as the key to unlocking the potential for this promising renewable energy resource. The process will use non-food ingredients such as the leaves from a corn plant or wood wastes, and convert the bio-based material through a gasification process to synthesis gas. Dow’s technology helps convert the synthesis gas into a mixture of alcohols including ethanol that can be used as transportation fuels or chemical building blocks. The joint evaluation program will focus on improving the mixed alcohol catalyst, as well as demonstrating pilot scale performance and the commercial relevance of an integrated facility.
Comments: Cellulosic biofuels are seen to be a sustainable option that will put an end to the food versus fuel debate surrounding bio-ethanol. The major barrier has been a viable technology that can convert cellulosic biomass such as corn stover, husk, wood chips, etc. into biofuels. There are two routes to achieve this: 1) via the breakdown of cellulosic biomass into fermentable sugars, and 2) via biomass gasification to produce syn-gas which can then be converted to mixed alcohols. In the former case, the bottleneck lies in the breakdown of cellulosic and enzyme technology. In the gasification route, issues lie with the selectivity of the syn-gas conversion process towards ethanol.
The current research collaboration is tuned towards developing catalyst technologies that can effectively convert syn-gas from biomass into ethanol and other alcohols selectively and efficiently. From Dow’s perspective, this also furthers their interest in producing chemical building blocks such as ethylene from ethanol, which may be used to produce other petrochemical products in an environmentally sustainable manner.
Dow is currently in process of commercializing its HDPE homopolymer product using ethylene sourced from sugarcane-based ethanol in Brazil. The use of cellulosic ethanol for the same would eliminate the feedstock uncertainty due to conflict with food (especially in North America where the ethanol is based on corn).
Wacker Chemie to discontinue PVB production in Germany
Wacker Chemie AG will discontinue the production of its PIOLOFORM® polymer binders effective September 30, 2008. The Munich-based chemical group announced this decision today, citing limited expectations for polyvinyl butyral growth in industrial applications such as coatings, paints, and printing ink. At the same time, raw material and energy costs continue to climb sharply. Both these factors are putting at risk the sustained profitability of this business.
To allocate supplies of PIOLOFORM® in the coming months, WACKER POLYMERS is currently working closely with clients to coordinate delivery schedules and define terms. These negotiations include price increases, too. From August 1, 2008, WACKER POLYMERS will raise prices for PIOLOFORM® by up to 15% in Europe, and up to 25% overseas as well as for shipments invoiced in US dollars.
In 2007, WACKER POLYMERS achieved PIOLOFORM® sales in the lower double-digit million Euro range. This corresponds to about 0.5 percent of Group sales. Around 20 people are employed in this sector. They will be offered jobs in other parts of the Group.
PIOLOFORM® polyvinyl butyrals from WACKER POLYMERS exhibit excellent adhesion to aluminum foils and plastic films and are therefore the preferred binders for formulating printing inks for flexible laminate packaging. They are flexible, odorless, and tasteless and show low solvent retention. Formulations based on specialty low-viscosity grades can absorb more pigments and thereby greatly increase the color intensity of the ink. PIOLOFORM® is also used in a large number of industrial coatings, such as corrosion-protection primers, masonry paints, and plastics paints.
Comments: The major application of PVB is as an interlayer for safety glass which is used in automotive and architectural applications. The key producers of PVB globally are DuPont, Solutia, and Wacker. However, both DuPont and Solutia are integrated into the manufacture of the interlayer as well. Wacker is only a producer of resin which puts the company at a relative disadvantage compared to others.
Nova Roll and Pliant announce film joint venture in Russia
Pliant Corporation and Nova Roll announced their intent to form a Joint Venture to produce world-class film and packaging solutions. This business will be headquartered in Moscow, Russia, and will produce the following value-added films: (1) PVC film, (2) Machine grade stretch film, (3) Hand wrap stretch film, (4) Printed shrink bundling film, (5) Food sealant film, and (6) Barrier film.
Products will be sold in Russia and CIS countries through Pack and Service, and in the rest of Europe through Pliant GmbH.
According to Pliant, the combination of technologies and manufacturing know-how with the prestige and local commercial relationships of Nova Roll will allow the company to become a market leader for these products in Russia, CIS, and surrounding countries.
Nova Roll is the largest producer of adhesive tapes, stretch film, and different types of bags in Russia with sales in excess of $83 Million (USD). On a production area of 150,000 square feet, Nova Roll operates 5 blown and 2 cast extrusion lines, 9 flexographic printing presses, 7 slitters, 3 coating lines, and 18 bag machines. Nova Roll employs 430 people.
Pliant is a $1.1 Billion (USD) producer of value-added film and flexible packaging products for personal care, medical, food, industrial, and agricultural markets. Pliant has 21 manufacturing plants in 5 countries, 185 film extrusion lines, 35 printing presses, 75 bag machines, 75 patents, and a world-leading R&D program.
Comments: Pliant Corporation, headquartered in Schaumburg, Illinois has 20 manufacturing and R&D facilities around the world and is one of the largest producers of value-added film and flexible packaging products. The company’s move to enter the Russian market will enable it to capture the high growth of the consumer market that the country is experiencing in recent years. Russian economic growth has averaged 7% during the past 10 years and is expected to continue on this path influencing the growth of the plastic film industry.
Solvay to sell its functionalized additives business to Dutch firm Addcomp
Solvay announced the sale of its Priex functionalized additives business to Addcomp Holland, a specialist supplier of one-pack additive systems.
The deal covers Priex technology, production equipment, and know-how. The financial terms are not being disclosed.
Priex is a range of functionalized homopolymers and copolymers capable of substantially enhancing the mechanical, thermal, and processing properties of polyolefins. There are two product families: maleic anhydride grafted polymers and ionomers.
Priex polymers are being used in a range of industries. Applications include a protective coating of metal surfaces, such as beverage cans and belt conveyors, pipe reinforcement, and use in three-layer bottles for packaging that undergoes sterilization. Priex resins are mainly available in pellet form and used, typically, at concentrations of 2-5% by weight. Some grades are water-based emulsions.
Following the sale of its polyolefin production business in 2005, Solvay said Priex is no longer a strategic fit for its activities.
Addcomp Holland, based in Nijverdal, produces one-pack additive systems for use in polyolefins, PS, PET, and polyamides. It supplies both polymer manufacturers and plastics processors.
Comments: This is a somewhat expected move by Solvay who sold its polyolefin production business in 2005 and hence this minor activity – Priex Technology involving functionalized polyolefins is no longer a strategic fit for its overall plastics business activities involving mainly specialty polymers (55%) and vinyl (45%). On the other hand, this niche market – functionalized additives is a perfect fit for Addcomp Holland, based in Nijverdal, a producer of one-pack additive systems for use in polyolefins, PS, PET, and polyamides.
This is pretty much in line with Addcomp’s overall business strategy – focusing on providing innovations to customers and therefore investing significant resources in the product- and process development. Addcomp does not produce and offer color masterbatches or mineral-filled compounds but sells more than 600 products, both proprietary and development grades. Addcomp was founded in 1997 as a supplier of Polymer Additives Solutions to the polymer industry. Since that time, with rapid growth in both turnover and product development, Addcomp has achieved a position – the first representative of the polymer industry, to rank in the Dutch Technology Fast 50 competition organized by Deloitte, both in 2005 and 2006.
Contact us at ADI Chemical Market Resources to learn how we can help.