In its second move to put a new plastic resin in its basket this year, Dow Chemical Co. announced Nov. 10 that it agreed to buy PET resin manufacturing facilities from Italy's Enichem. Dow said it will purchase 80 percent of INCA International SA, a subsidiary of Enichem that makes PET bottle resin and purified terephthalic acid, the main precursor of PET.
With the buy, Dow will acquire PET and PTA products, production plants and manufacturing technology, and interest in Enichem's licenses of PTA technology around the world, said Nico Blaaw, Dow Europe spokesman. He spoke by telephone Nov. 15 from his firm's headquarters in Horgen, Switzerland.
Previously, Dow announced it would make polypropylene at a polyolefins complex it intends to purchase in the former East Germany. Dow intends to build a 400 million-pound-per-year PP plant at the Buna complex.
Dow announced it would acquire the German facility in April, but its acquisition was put into question Nov. 8 when the European Commission disallowed several subsidies Dow requested from the German government. The European Commission approved subsidies to Dow totaling $6.77 billion, about $1.08 billion short of the amount Dow sought.
Dow said it was disappointed with the EC's decision, and will review it before proceeding, but industry analysts said they expect Dow to go through with its intended purchase. Dow is expected to pay $1.25 billion for the complex.
Analysts said they believe these acquisitions represent Dow's first steps toward becoming a global maker and marketer of both PP and PET, polymers for which growth potentials are better than the polymers Dow offers today.
Several industry executives said they believe Dow may soon make a further announcement about acquiring the small, Spanish producer of PET fiber, La Seda, or joining DuPont Chemical Co. in a joint venture to produce and market both PET and PTA. DuPont is one of the world's largest makers of PET fibers, but has a small presence as a maker of PET resins.
Dow's Blaaw acknowledged the speculation about Dow's plans, but said the company is not negotiating with other companies at this time.
He said his company is still formulating its plans for both PP and PET, and will not reveal its thoughts and business philosophies for those products until its plans are more concrete.
With the INCA acquisition, Dow is acquiring PET and PTA production facilities in Ottana, Sardinia and Pisticci, Italy. In Ottana, INCA has annual production capacity to make 198 million pounds of PET and 242 million pounds of PTA. In Pisticci, INCA makes 66 million pounds of PET.
With that capacity, Enichem has ranked as the seventh-largest producer of PET in the world, but it is far smaller than Eastman Chemical Co., Hoechst AG and Shell Chemical Co., the world PET production leaders. Those three companies will have produced 51 percent of the world's 7 billion pounds of PET this year, while 27 other companies, including Enichem, will have made the remaining 49 percent.
Dow did not reveal terms of its acquisition, but Paul Raman, chemical industry analyst for S.G. Warburg & Co. Inc. of New York, set the purchase price for INCA at $200 million.
Raman estimated that the INCA operations contribute sales of $300 million a year, and profit of $45 million a year.
Blaaw said the INCA facilities market products primarily for bottle resin applications to countries surrounding the Mediterranean Sea.
While he said Dow does not intend to change the market focus, he said his company may move into other PET markets after the acquisition is complete.
Blaaw said the INCA acquisition is subject to approval from European agencies, but added that Dow hopes to close the acquisition by Jan. 4.