Europe's leading PVC producer, EVC International NV, and Norwegian oil and chemicals group Norsk Hydro ASA have ditched plans to merge their vinyl interests.
The groups said they agreed to end negotiations started in July because of ``differences in strategic priorities and emphasis'' in planning the joint business. The venture, with a 4 billion-pound-per-year capacity, would have been one of the world's top four PVC players.
The aim was to bring together the greater part of Norsk Hydro's petrochemicals division with EVC in what both dubbed a ``merger of equals.'' Norsk was to hold a 45 percent stake in the PVC venture, to include EVC's downstream PVC compounding, rigid films and Indian film operations.
However, Norsk Hydro of Oslo, Norway, wanted the merged group to concentrate initially on developing its own proposed upstream petrochemical projects in the areas of chlor-alkali, vinyl chloride monomer and PVC production, an EVC spokeswoman said.
Meanwhile, Amsterdam, Netherlands-based EVC preferred the joint venture to proceed with more of a downstream emphasis, investing in fabricated PVC products, she added. It was a question of differences over the correct timing for other investments.
EVC admitted that investment-plan differences occurred when it became clear the joint venture would not generate as much cash as originally expected.
Norsk Hydro's spokesman was reticent to expand on the company's brief statement. He said the break resulted from the would-be partners' differences of view on the merged firms' initial direction and emphasis, but there were other factors. He would not elaborate.
Both parties to the failed merger are on record as wanting to see further rationalization in Europe's PVC industry, and each will consider alternative partnership deals.
Norsk now will look to alternatives for its petrochemicals business, such as another merger or partnership, a spokesman said.
``We will work with the aim of participating in [the European PVC industry's] restructuring process ... we'll look for a long-term arrangement to ensure our long-term profitability,'' he said.
The spokesman added that changes taking place in the industry since talks with EVC began ``make an arrangement of some kind more important.'' PVC prices in Europe have plunged 60 percent since the start of this year, prompted by the steep fall in Asian demand.
Meanwhile, the EVC spokeswoman stressed that the groups, which signed a nonbinding letter of intent in July to establish the venture by early 1999, enjoyed ``very good cooperation at all stages.'' They had ``deep discussion'' but could not resolve the clear differences that arose at the detailed business planning stage, she said.
``EVC will continue to review opportunities for optimizing its polymer activities, while at the same time, investing in the continuing development of its successful rigid film and vinyl technology businesses,'' the Netherlands group said.
Its spokeswoman said it was premature to speak of alternative partners; although, before entering talks with Norsk Hydro, EVC ``analyzed the market situation and identified possible partners.'' She would not comment when asked about any recent approaches regarding possible new joint venturers.
EVC will now review its plan to shelve the closing of its PVC/VCM operation at Brindisi, Italy, pending the outcome of the merger negotiations.
Originally, the group planned to shut the site, capable of turning out 397 million pounds of VCM and 309 million pounds of PVC annually, by the end of next year.
``We are studying this again. In the next month we will decide on [the site's] future,'' the spokeswoman said.
She said the industry picture in Europe has changed slightly since the merger talks began, with Shin-Etsu Chemical Co.'s takeover plan of Rovin, the PVC joint venture of Shell Chemicals Ltd. and Akzo Nobel NV; and Solvay SA and BASF AG's agreed PVC alliance. But she said there is room for more rationalization in the face of poor market forecasts.