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September 14, 1998 02:00 AM

NOVA COULD BE EYEING CHEVRON STYRENICS

Frank Esposito
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    As Nova Chemicals' bid to acquire Huntsman Corp.'s styrenics business awaits final approval, industry insiders are saying Nova may acquire similar holdings from Chevron Corp.

    The rumor mill began working Aug. 24 when Nova of Calgary, Alberta, announced plans to divest its 26 percent share in Dynegy Inc., a Houston energy services provider. Nova President and Chief Executive Officer Jeffrey Lipton said in a news release the move is part of Nova's plan to focus on commodity chemicals.

    Houston-based Chevron also has a 26 percent share in Dynegy. The joint ownership led to speculation that Nova might trade its share in Dynegy for Chevron's styrenics business, which includes more than 700 million pounds of polystyrene production.

    Chevron and British Gas, another Dynegy shareholder, have right of first refusal on Nova's share. Chevron spokesman Fred Gorell said the company has taken no formal action regarding Dynegy. He declined to comment on the possibility of the suggested swap with Nova.

    In a recent meeting with stock analysts, Lipton described such a swap as ``doable but complex.'' Nova spokesman Rocco Ciancio said the firms have discussed Nova's Dynegy share, but have not talked specifically about a petrochemical swap.

    ``We're looking at all of our options right now,'' Ciancio said. ``[Trading for Chevron's styrenics] is not necessarily the route this will go, by any means.''

    However, it's unlikely Nova could move to acquire Chevron's styrenics before its deal with Huntsman is completed, according to an industry consultant. That deal is scheduled to close by the end of the year.

    ``I'm sure both companies are looking at [the swap], but it's my understanding that the Nova-Huntsman deal isn't a slam-dunk,'' the consultant said. ``If Nova acquired Chevron after acquiring Huntsman, it would have about 40 percent of the North American polystyrene market and I'm sure the FTC would look at that.''

    A combined Nova and Huntsman would hold about half of the North American expanded PS market. That level of market dominance also could be a stumbling block for federal trade officials who are reviewing the proposed deal, the consultant added.

    If the Nova-Huntsman deal is approved, Nova would have about 2.5 billion pounds of PS capacity, surpassing Dow Chemical Co. of Midland, Mich., as North America's largest PS maker.

    Nova, which also is one of North America's largest polyethylene makers, recommitted itself to commodity plastics earlier this year when it divested its oil and gas business. Company officials have said Nova is in discussions to grow its olefins and polyolefins share via an undefined transaction with another industry player.

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