Deal combines global styrenic block copolymer makers

By Frank Esposito
Senior Staff Reporter

Published: January 28, 2014 10:41 am ET
Updated: January 31, 2014 12:27 pm ET

Image By: Kraton Performance Polymers Inc. Kevin Fogarty

Related to this story

Topics Materials, Mergers & Acquisitions, Materials Suppliers
Companies & Associations Kraton Polymers LLC, Houston

Styrenic block copolymer maker Kraton Performance Polymers Inc. is merging with the SBC business of LCY Chemical Corp. to create a materials firm with annual sales of more than $2 billion.

Houston-based Kraton and LCY of Taipei, Taiwan, announced the deal on Jan. 28. The combined firm will remain a public company, with ownership split evenly between shareholders of each company.

The new Kraton will continue to be based in Houston, and Kevin Fogarty will remain the firm’s CEO.

The combination “will present a number of strategic, operating and financial benefits,” Fogarty said in a Jan. 28 conference call. He added that the transaction “will position us for profitable growth in the years to come and will create value for our shareholders.”

LCY ranks as the world’s third-largest SBC maker based on volume, and had SBC sales of $612 million in the year ended Sept. 30. A recent 220 million-pound capacity expansion in Huizhou, China, is expected to increase its SBC sales to $801 million in 2014. In addition to China, LCY also operates SBC plants in Taiwan and in Baytown, Texas, near Houston.

SBC is the largest of LCY’s seven units. The firm also makes polypropylene resin and a range of chemical products.

In a news release, LCY Chairman and CEO Bowei Lee said that the deal with Kraton “addresses the strategic objectives for both LCY and Kraton and allows the combined company to develop and manufacture more innovative products.”

Lee founded LCY in 1965. The firm opened its first production plant — making formaldehyde and urea formaldehyde resin — in 1967. It opened numerous other chemical plants before buying the Baytown SBC plant — which has annual production capacity of almost 300 million pounds — from Polimeri Europa in 2003. The Huizhou SBC plant opened in 2008.

Kraton has faced financial challenges recently, losing $5.5 million in the first nine months of 2013 as sales fell 11 percent to just over $1 billion. The firm had shown a $13.3 million profit in the same period in 2012. Officials said Kraton’s third-quarter performance was impacted by a maintenance turnaround at its plant in Belpre, Ohio. Kraton’s other global SBC plants are in Japan, Germany, France and Brazil.

Kraton also has been affected by wild swings in price for butadiene feedstock in recent years, which has affected both financial projections and results.

On Wall Street, news of the merger sent Kraton’s per-share stock price up almost 15 percent to $24.50 in early trading Jan. 28. It was at $24.80 in late trading Jan. 29.

Market analysts Robert Eller and Roger Young — both with Robert Eller Associates in Akron, Ohio — said the Kraton/LCY deal should be beneficial to both firms.

“Kraton is trying to leverage themselves in market segments where they haven’t been able to,” said Young, the firm’s vice president for Asia. “LCY is a very good fit. They give Kraton a very strong position in Asia. Kraton is getting a low-cost capacity base and manufacturing structure.”

Eller, the firm’s president, added that the deal “is part of the globalization of the [SBC] industry.”

“It’s representative of a new kind of global joint venture,” he said. “Kraton was somewhat late getting into Asia, so this [deal] is going to help. But one of the questions they’ll need to answer is what to do with global [SBC] overcapacity.”

Kraton officials said that they did not expect its SBC JV with Formosa Petrochemical Corp. to be affected by the deal with LCY. Kraton and Formosa are building a plant with annual production capacity of almost 70 million pounds of hydrogenated SBCs in Mailiao, Taiwan.

The Kraton/LCY deal is expected to create annual savings of $65 million by 2017. It’s also expected to add 75-80 cents per share in operating earnings in the first full year of combined operations.


Comments

Deal combines global styrenic block copolymer makers

By Frank Esposito
Senior Staff Reporter

Published: January 28, 2014 10:41 am ET
Updated: January 31, 2014 12:27 pm ET

Post Your Comments


Back to story


More stories

Image

DuPont resins help take Nike golf balls 'Fore!'ward

July 25, 2014 1:07 pm ET

It may be difficult to imagine just how much science, not to mention rubber and plastic components, go into a golf ball. But global giant DuPont Co....    More

Image

Bioplastics maker wins government funding

July 25, 2014 12:13 pm ET

Canadian bioplastics maker Solegear Bioplastics Inc. has won $1.6 million in funding from the government-sponsored Western Innovation Initiative...    More

Image

Report: biodegradeable plastics use in Europe to grow 12 percent

July 25, 2014 10:25 am ET

The biodegradable plastics market in Europe is forecast to witness 12 percent compound growth during 2014-19, according to TechSci Research's...    More

Image

Metals and plastics company NN to buy Autocam in $300 million deal

July 25, 2014 10:07 am ET

A Tennessee metals and plastics company said it has agreed to acquire auto parts supplier Autocam Corp. in a deal valued at $300 million.    More

Image

Prices trending up for some recycled resins

July 24, 2014 1:27 pm ET

Plastics News is correcting prices for recycled grades of several commodity resins on this week's resin pricing chart.    More

Market Reports

Plastics Recyclers Data Report & Directory

This exclusive MS Excel database contains all the companies from Plastics News' ranking of top North American Recyclers and Brokers by reprocessed volume and also includes a directory with materials processes, services offered and company contact information. Data is based on primary research by PN editorial staff.

Learn more

2014 Injection Molding Industry Report

GROWTH, OPPORTUNITY IN SIGHT FOR INJECTION MOLDERS IN 2014

In the wake of the economic turbulence earlier in this decade, molders today find themselves in much better shape. Molders are gaining a competitive advantage by investing in people, equipment and seeking inroads into new markets on a global scale.

Growth in the injection molding industry is going to be driven by low financing costs and a continued move to reshore some business.

Learn more

Shale Gas Market - Analysis of North American Region

This report highlights the impact of shale-based natural gas on the North American plastics market and features an in-depth analysis of production trends in the United States during 2013 and a forecast for 2014 and beyond.

Learn more

Upcoming Plastics News Events

September 10, 2014 - September 12, 2014Plastics Caps & Closures 2014

January 14, 2015 - January 14, 2015Plastics in Automotive

February 4, 2015 - February 6, 2015Plastics News Executive Forum 2015

More Events