Like excited school kids dealing Pokemon cards, BP Amoco plc and Solvay SA swapped their polypropylene and engineering polymers businesses and agreed to partner up in high density polyethylene.
In a deal announced Dec. 19, London-based BP Amoco agreed to trade its engineering polymers unit for the PP business of Brussels, Belgium-based Solvay. In HDPE, the firms will create separate joint ventures in the United States and Europe, with the biggest impact coming from oil-rich BP entering the North American PE market.
BP, the world's third-largest PP maker, now gains another 1.7 billion pounds of PP capacity, including about 840 million in Deer Park, Texas, and plants in Lillo, Belgium, and Sarralbe, France.
Solvay would gain BP's portfolio of high-performance resins including polysulfone, polyketone, polyamide imide and liquid crystal polymers. BP's production sites for the materials are in Atlanta; Augusta, Ga.; Marietta, Ohio; and Greenville, S.C.
In HDPE, the U.S. site would be a 51-49 venture in favor of Solvay and would consist of almost 2 billion pounds of annual capacity in Deer Park. The European HDPE venture would be a 50-50 effort and encompass BP plants in Grangemouth, Scotland, and Lavera, France, as well as Solvay plants in Lillo, Sarralbe, and Rosignano, Italy.
BP's engineering polymers unit has annual sales of about $623 million, while Solvay's PP business posts annual sales of about $445 million. The combined sales of the two HDPE ventures are about $1.8 billion a year.
Solvay Chief Executive Officer Alois Michelsen said in a news release that the deal will boost the firm's growth and reduce its cyclicality and diversification. He added that its PP business had difficulty competing in the global market because of ongoing industry consolidation.
The deal also "gives BP an equity position in the U.S. HDPE market to support the growth of [its] olefins business," according to Byron Grote, chief executive officer of BP's chemicals business.