The joint venture announced Jan. 31 by Dow Chemical Co. and DuPont Co. is so large and encompassing that it will not have any direct competitors, industry analysts said last week. The new entity, expected to have sales of $1 billion in its first year, already is viewed as a likely success, injecting DuPont's mature thermoset rubber businesses with new life from Dow's metallocene catalyst technology.
Dow will be able to use the venture to sidestep a $600 million investment in market development that it needed to make resins made with metallocene catalysts successful.
The Dow/DuPont entity will be about five times larger in terms of sales than Advanced Elastomer Systems L.P., established in 1991 by Exxon Chemical Co. and Monsanto Co., and will offer a larger number of products than Uniroyal Chemical Co., a leader in synthetic rubbers, said Robert Eller, an Akron, Ohio-based plastics and rubber consultant.
Eller said AES of St. Louis and Uniroyal of Middlebury, Conn.-and myriad other companies - will compete with parts of the entity, but no other company has the range of synthetic rubbers and thermoplastic elastomer products that will characterize the corporate child.
``There is no precedent in the history of the polymers industry that I can think of for a comparably sized joint venture that offers such a broad range of complementary products. The joint venture offers both partners a means to pole vault over competition by using established global organizations and the market positions of the incumbent polymers that the metallocene resins will be competing with,'' he said.
Paul Raman, an industry analyst with New York securities firm S.G. Warburg, said DuPont's synthetic rubber business now has sales of $750 million a year, and generates $75 million in pre-tax profit, but has growth of only 1-2 percent per year.
Dow is contributing $250 million in sales, but its metallocene technology will be a significant factor in the venture's growth, he said.
``[Total sales] could grow to $2 billion in five years, suggesting a compound growth rate of 15 percent,'' Raman said. ``DuPont would be partially divesting a business which in the past has been termed less strategic or underperforming, and would be accessing potentially better growth and earnings.''
The companies have not picked a name or headquarters site for the venture.
Having only signed a letter of intent that commits them to forming the entity, the firms also do not know the number of facilities and employees the venture might have.
Clifford Lee, a project director for Chemical Market Resources Inc. of Houston, said he expects the combination of Dow's technology with DuPont's marketing savvy to stimulate fundamental changes in the markets for TPEs and synthetic rubbers.
``The forte of this [Dow] technology is its unique capability of synthesizing multicomponent copolymers with unparalleled efficiency and versatility,'' Lee said.
For example, the firms may find it possible to make in reactors copolymers that combine polyethylene elastomers with hard-to-handle diene monomers - components of ethylene propylene diene monomer rubbers.
Raman and Eller said they expect Dow's products to gain a significant position in wire and cable and automotive markets.
