Koch Industries makes a big bet on shale gas: $2.1 billion bid for PetroLogistics

By Frank Esposito
Senior Staff Reporter

Published: May 28, 2014 11:46 am ET
Updated: May 28, 2014 2:44 pm ET

Image By: Flint Hills Flint Hills President and CEO Brad Razook

Related to this story

Topics Materials, Mergers & Acquisitions, Materials Suppliers

Flint Hills Resources LLC — a unit of industrial conglomerate Koch Industries — is buying propylene supplier PetroLogistics LP for $2.1 billion.

The all-cash deal represents a premium of more than 8 percent over PetroLogistics’ closing stock price on May 27. The transaction represents a big bet on future economics of shale-based natural gas for Flint Hills and Koch, both based in Wichita, Kan. Natural gas processing gas supplies the propane that Houston-based PetroLogistics converts into propylene monomer via the propane dehydrogenation (PDH) process.

In a May 28 news release, Flint Hills President and CEO Brad Razook said PetroLogistics’ plant on the Houston Ship Channel is a world-class operation and that its capabilities “are well-aligned with our existing chemical and refining business.”

The sale also represents the culmination of a journey that began in 2008 when PetroLogistics’ original investors bought that defunct olefins plant from ExxonMobil Chemical Co. The plant then was retrofitted to make on-purpose propylene via PDH, instead of as a by-product of cracking ethylene. Globally, about 60 percent of propylene monomer is used to make polypropylene resin.

PetroLogistics began production in early 2011 and now has almost 1.5 billion pounds of annual propylene capacity there. The firm posted sales of almost $760 million in 2013, when it produced almost 1.1 billion pounds of propylene. Full-year comparisons are not available, but PetroLogistics’ fourth-quarter sales of $191 million were up 15 percent vs. the same quarter in 2012.

First-quarter 2014 sales at PetroLogistics grew almost 6 percent vs. the year-ago quarter to $220 million. Propylene production for the quarter also grew almost 6 percent to almost 316 million pounds.

PetroLogistics went public in May 2012 with its stock at $16.50 per share. The price has bounced between $11 and $16 since January 2013 and had closed at just under $13 on May 27.

Flint Hills has interests in plastics, chemicals and refining. Its plastic operations include PP plants in Longview, Texas, and Marysville, Mich., as well as an expandable polystyrene plant in Peru, Ill. The firm also makes plastic feedstocks ethylene and propylene at a plant in Port Arthur, Texas.

The PetroLogistics deal is Koch’s second big plastics-related move in the last nine months. In September the firm paid $7.2 billion for Lisle, Ill.-based Molex Inc., a major producer of plastic components for the electronics market. Koch also owns Invista, a leading maker of nylon resins and fibers also based in Wichita.


Comments

Koch Industries makes a big bet on shale gas: $2.1 billion bid for PetroLogistics

By Frank Esposito
Senior Staff Reporter

Published: May 28, 2014 11:46 am ET
Updated: May 28, 2014 2:44 pm ET

Post Your Comments


Back to story


More stories

Image

Investment firm buys Ontario cap molder

October 23, 2014 2:01 pm ET

A company whose varied interests include food and refrigerated transportation businesses is now moving into plastic caps.    More

Image

Westlake adding ethylene capacity in Louisiana

October 23, 2014 9:54 pm ET

Westlake Chemical Corp. will add 250 million pounds of annual ethane-based ethylene capacity as part of a $330 million expansion project in Lake...    More

Image

PolyOne increases quarterly profits despite falling sales

October 23, 2014 4:55 pm ET

North American compounding leader PolyOne Corp. saw its third-quarter profit increase, even as sales fell vs. the year-ago period.    More

Image

Total picks new management following CEO's death in crash

October 23, 2014 11:03 am ET

Total SA has picked a new management team to oversee the company in the wake of a plane crash in Moscow that killed its chairman and CEO earlier this ...    More

Image

Report: Private equity companies may seek to buy Bayer MaterialScience

October 23, 2014 10:56 am ET

A number of investment groups are reported to be interested buying Bayer AG's MaterialScience operation, valued at around 10 billion euros ($12.6 bill...    More

Market Reports

Plastics Recycling Trends in North America

This report is a review and analysis of the North American Plastics Recycling Industry, including key trends and statistics based on 2013 performance. We examine market environment factors, regulatory issues, industry challenges, key drivers and emerging trends in post-consumer and post-industrial recycling.

Learn more

Plastics in Mexico - State of the Industry Report

This report analyzes the $20 million dollar plastics industry in Mexico including sales of machinery & equipment, resins and finished products.

Our analysts provide insight on business trends, foreign investment, top end markets and plastics processing activity. The report also provides important data on exports, production, employment and value of plastics products manufactured.

Learn more

Plastics Caps & Closures Market Report

The annual recap of top trends and future outlook for the plastics caps & closures market features interviews with industry thought leaders and Bill Wood’s economic forecast of trends in growing end markets. You will also gain insight on trends in caps design, materials, machinery, molds & tooling and reviews of mergers & acquisitions.

Learn more

Upcoming Plastics News Events

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

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

June 2, 2015 - June 3, 2015Plastics Financial Summit - Chicago 2015

September 16, 2015 - September 18, 2015Plastics Caps & Closures - September 2015

More Events