Nova Chemicals Inc. will extend its styrenic polymers business to include expandable polystyrene and styrene/maleic anhydride by purchasing Arco Chemical Co.'s plastics business. The two firms announced June 10 a letter of intent for the deal, which will boost Nova's styrenic polymers capacity to 1.3 billion pounds per year. It includes Arco's Beaver Valley, Pa., operation, which makes Dylite EPS, Dylark SMA and Dylene PS resin; and its Painesville, Ohio, Dylite production facility.
The deal will be the second major restructuring in North America's styrenic polymers market in less than a year. Bayer Corp. finalized its purchase of Monsanto Co.'s styrenics business Dec. 31.
Nova makes PS resin, mainly commodity crystal and high-impact grades, at Indian Orchard, Mass.; Decatur, Ala.; and Mon-treal, said Nova spokesman Paul Clark. It also has an arrangement for Monsanto Co. to toll produce PS at Addiston, Ohio. Nova's total PS capacity is 743 million pounds per year.
Arco has 445 million pounds of annual EPS and PS capacity and 70 million pounds of SMA capacity, Arco spokesman Gerald Davis estimated in a telephone interview from Arco's Newtown Square, Pa., head office.
``This puts Nova in with the big boys and expands its product line,'' said Jim Milton, an analyst with Newcrest Capital Inc. of Toronto.
Arco agreed to long-term supply of styrene monomer from Channelview, Texas, where Nova has an equity interest in Arco's 2.57 billion-pound styrene facility. Nova also makes styrene in Sarnia, Ontario.
Arco said its styrenic polymers business is profitable but it wants to focus on propylene oxide and derivatives such as polyols, areas in which it is a leader.
Davis said it would take ``massive investment'' in styrenics for Arco to get an advantage in cost and technology. Clark said the firms had been negotiating the agreement for about two months. Most of the 600 employees in the Arco business will transfer to Nova.
Nova will debottleneck the Arco facilities and Nova's own PS plants after the deal is done, said Bill Greene, who will be in charge of the supply chain for Nova's styrenics.
Nova's current plans are to boost Nova's capacity by 15 percent by the end of the year. Davis would not disclose the planned cost of debottlenecking. He currently is vice president of facilities maintenance for Nova Corp.'s gas transmission business.
Greene estimated that the deal will make Nova the second- or third-largest styrenics supplier in North America with capacity similar to that of Huntsman Chem-ical.
Dow Plastics is the largest with as much as 1.5 billion pounds per year.
Arco's sales and technical service operations in Europe and Japan will boost Nova's offshore presence, where it has not been active in PS for a few years.
Company officials would not comment on a rumor that the agreed-on price will be about $100 million. They said terms will be announced when the deal is done, probably within a few months.
Arco's styrenic polymers sales last year were about $310 million. Nova's sales of PS and styrene monomer last year were about C$690 million (US$503.7 million), Clark estimated.
Nova Chemicals, also a major producer of polyethylene, is a subsidiary of Nova Corp. of Calgary, Alberta.