DuPont Co. will consolidate its position as the largest PET film producer and could enter the PET bottle resin market in a deal with Imperial Chemical Industries plc.
The deal also would launch DuPont into polyethylene naphthalate resin production, expand its PEN films business and boost its offshore titanium dioxide pigment capacity.
London-based ICI said the $3 billion sale to DuPont will help finance its recent $8 billion acquisition of Unilever Co.'s specialty chemicals business. The sale also trims ICI's portfolio as it focuses on specialty chemicals. The companies expect to complete the deal within nine months.
DuPont, the world's largest PET film producer, agreed to buy ICI's PET film business for $650 million. The deal will add ICI's global capacity of 264 million pounds per year to DuPont's 352 million pounds. ICI currently is the fourth-largest producer, after Toray and Hoechst Diafoil, estimated Mike Hartnagel, DuPont Films vice president and general manager.
The PET film businesses will complement each other, Hartnagel said in a telephone interview from DuPont's Wilmington, Del., head office. ICI is big in packaging, including unlined, coated and coextruded films, and so-called white films used for business cards and in the growing debit-card market in Japan. DuPont has focused on electronic films, magnetic media, industrial thin films and specialty packaging. DuPont spokeswoman Anne McIntosh said that because the two firms' film businesses are complementary, officials don't expect any antitrust concerns to interfere with the deal.
DuPont's PET films plants are in Circleville, Ohio; Florence, S.C.; Richmond, Va.; Luxembourg; and Foshan, China. ICI makes films at Hopewell, Va.; Dumfries, England; Rozenburg, Holland; and Ibaraki, Japan. The ICI business had sales of £345 million (US$578.6 million) last year. DuPont's PET and polyimide films businesses had sales exceeding $1 billion last year.
DuPont agreed to buy ICI's PET polymer and raw materials business for $1.6 billion. In thermoplastic markets DuPont has focused on specialty PET resins, while ICI sells much of its PET to bottle molders.
Hartnagel said his firm is working on lower-cost PET resin polymerization technology that will help it compete in commodity PET bottle resin markets. In Nashville, Tenn., DuPont is testing techniques to reduce the number of polymerization steps from six to four. He said ICI research under way could cut the cost of making terephthalic acid, a major raw material for bottle resins, giving DuPont an even better cost position to enter such markets.
``The key is to assemble, and then sustain, [a] significant technology advantage at each step of the polyester chain,'' John Krol, DuPont president and chief executive officer, said in a news release.
DuPont said PET is a $30 billion industry globally and growing about 7 percent a year.
DuPont could decide by the end of the year whether to get into commodity bottle resin markets. If it does enter the business, DuPont said it will build a 400 million-pound-per-year unit based on its new technology at an undisclosed location for start-up by late 1999. Hartnagel said DuPont developed bottle-grade resin technology 30 years ago and licenses it widely, including to ICI. DuPont makes PET resin at about a dozen sites, including facilities in Germany and Luxembourg.
ICI, based in Wilmington, Del., makes PET resin in Fayetteville, N.C., and Wilton, England. Its major markets are beverage, water, juices, liquor and other liquids, but it also sells to film extruders and compounders, said Dennis Magyar, business manager for Melinar resin. The company is not in markets for crystallized and amorphous PET.
DuPont makes PEN films at Circleville and in Luxembourg, but it buys PEN resin. ICI makes PEN resin in Fayetteville, N.C., and PEN films in Hopewell, Va.
ICI's PET resin and raw materials business had total sales of £595 million (US$997.8 million) last year. Hartnagel said it will make DuPont a big supplier of terephthalic acid in fast-growing Asian markets, where it now does not sell the PET precursor. ICI is majority owner of terephthalic acid plants in Taiwan and Pakistan that have current annual capacity of 1.8 billion pounds. ICI operates 1.2 billion pounds of terephthalic acid capacity in Wilton.
DuPont has 1.5 billion pounds of terephthalic acid capacity in Cape Fear, N.C., and Old Hickory, Tenn., that it mainly uses for PET fibers. It also makes 800 million pounds a year of dimethyl terephthalate at the sites for its PET films and engineering polymers.
DuPont will pay $750 million for ICI's titanium dioxide business outside North America. DuPont already is the biggest global producer of the white pigment widely used in plastics, coatings, fibers and paper. It will acquire Tioxide Group Ltd. plants in the United Kingdom, France, Spain, Italy, Malaysia and South Africa.
DuPont will not buy ICI's North American titanium dioxide facilities. ICI plans to sell them, and DuPont has agreed to cover any shortfall if ICI gets less than $150 million for them.
A DuPont spokesman said his firm has enough titanium oxide capacity in North America, and buying the ICI plants might raise antitrust concerns.
