Nova Chemicals Ltd. will have more opportunity to make deals with other resin suppliers after it is spun off at midyear from its parent company, officials said in a teleconference.
Nova Corp. announced Jan. 26 it plans to merge its energy business with TransCanada PipeLines Ltd. and spin off its chemicals operation as a separate company. Last November the Calgary, Alberta, firm said it would separate its energy and chemicals businesses, but the recently disclosed merger with TransCanada caught observers by surprise.
Jeffrey Lipton, who will be president and chief executive officer of the new Nova Chemicals business, said the resin major is interested in expanding in the U.S. market. He denied speculation that Nova Chemicals might be talking about a polyethylene deal with Dow Chemical Co., which also is a major PE producer in Alberta. He also said Union Carbide Corp. does not have an inside track on any Nova PE deal, although the two firms have ``a good relationship.'' Union Carbide and Nova each are building PE plants in Joffre, Alberta, and sharing the cost of a new ethylene facility there, due to begin operating in 2000.
Ted Newall, Nova vice chairman and CEO, said Nova Chemicals' affiliation with its parent, a major natural gas transmission utility, has hampered Nova Chemicals' ability to make deals with other resin companies. As a stand-alone firm, Nova Chemicals will have more opportunity for acquisitions, he said.
``We've had conversations with chemical companies and expect some will come to fruition,'' Newall said.
Lipton predicts that Nova Chemicals will grow through internal expansion, by capitalizing on its new generation of Sclairtech PE technology and possibly by acquisition. Officials said they expect Nova Chemicals to remain a separate company that will not be a target for a hostile takeover.
Nova Chemicals is North America's sixth-largest PE producer and third-largest polystyrene maker.
Lipton said he expects that PE markets will be oversupplied in late 1998 but will become tight by 2000 and 2001.
``Asian [resin producers] won't be able to expand because of their banking crisis,'' he said.
The Nova and TransCanada merger will create the fourth-largest energy services company in North America with annual sales of about C$16 billion (US$11.1 billion). Lipton said Nova Chemicals would get no special deals on raw materials for ethylene from the new company but it will remain a low-cost PE producer.