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October 30, 1995 01:00 AM

UNION CARBIDE ANNOUNCEMENT SURPRISES MANY

Bruce Vernyi
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    Union Carbide Corp.'s Oct. 23 announcement that it has developed new metallocene catalyst technology spawned both surprise and some skepticism among industry analysts and competitors. Union Carbide of Danbury, Conn., said it developed new metallocene catalysts that can be used with its gas-phase, Unipol technology, while complementing its new Unipol II technology for the production of polyethylene. Union Carbide said it intends to license the metallocene technology to its Unipol licensees by the end of 1996.

    The company has been widely acknowledged as the leading supplier of PE production technology since its development of the Unipol process helped introduce linear low density PE in the late 1970s. Its leading position, however, has been threatened by the development of metallocene catalyst technologies by Exxon Chemical Co. of Houston and Dow Chemical Co. of Midland, Mich.

    Union Carbide has not even hinted that it was working on metallocene catalyst technology.

    The most the company's executives previously would say was that they were certain their company would have the technology available when it became widely used and demanded in the industry.

    This announcement took several industry analysts and executives by surprise, but was greeted as an admirable move by Union Carbide.

    ``They really needed this, as a licenser of technology,'' Ken Sinclair, an industry analyst with SRI International, a consulting firm based in Menlo Park, Calif., said in a telephone interview Oct. 24.

    Other industry executives and analysts agreed with Sinclair, noting that Union Carbide appeared to be under competitive pressure, especially from BP Chemicals, a unit of British Petroleum Co. plc of London.

    BP licenses its own gas-phase PE production capacity, and announced it has developed its own metallocene catalyst systems for it.

    ``They [Union Carbide] were in a weak position, and it appeared, with BP having its own gas-phase metallocene technology, that they were trying to license yesterday's technology,'' Sinclair said.

    Both Sinclair and Ed Gambrell, global vice president for Dow's Insite Technology, said they view Union Carbide as a formidable, talented competitor whose announcement should not be taken lightly.

    ``I expected Union Carbide to come out with some enhanced catalyst or metallocene catalyst technology to protect their licensing prospects,'' Gambrell said in a telephone interview Oct. 25.

    Indeed, Sinclair said, research into metallocenes has proven there are numerous opportunities and as many routes for companies to take to achieve profitable results.

    While stating that he is not familiar with the details of Union Carbide's announcement, Sinclair said research into the field is still quite young and can be expected to yield new surprises.

    ``The probability that they have something completely different [from Dow's, Exxon's and BP's patented technologies] is quite high. There are lots of novel developments still coming out, and it appears that a year or two years of hard work maybe enough to give a company a solid patent position,'' Sinclair said.

    In a financial assessment of the announcement, Paul Raman, an industry analyst and vice president for research for S.G. Warburg & Co. Inc., a New York investment consulting firm, said Union Carbide stands to turn a large profit from its development.

    Raman said he estimates that Union Carbide now derives $100 million a year in profit from its licensing business - about 17 percent of its total profit.

    ``The company's licensing business could double in a best-case scenario,'' as a result of metallocene technology, he said.

    However, others in the industry were not confident that Union Carbide's announcement is for a distinctive technology or that it will be that profitable for the company.

    ``Union Carbide has been scrambling to catch up, and there has been tremendous pressure on the company vis-a-vis their licensing technology. Their patents may or may not be valuable. It remains to be seen whether they can do what Dow or Exxon can do,'' one industry executive said. He commented only after being assured of his anonymity.

    Another executive, who also would comment only anonymously, said he believes Union Carbide will find it difficult to operate with any technology without a patent license from Dow or Exxon. Dow holds a composition-of-matter patent that appears to be a barrier many companies may have difficulty overcoming, he added.

    In response to those comments, Sinclair said Union Carbide's announcement that it intends to use its technology commercially by the end of 1996 indicates to him that Union Carbide executives and attorneys believe its developments will work and that they will have no patent litigation problems.

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