A deal between a pair of oil and petrochemical giants has shaken up the ownership of Equistar Chemicals LP of Houston, which ranks among North America's largest polyethylene makers.
Occidental Petroleum Corp. of Los Angeles has sold its 29.5 percent stake in Equistar to Houston-based Lyondell Chemical Co. for $440 million. Lyondell already owned 41 percent of Equistar, with Millennium Chemicals Inc. of Red Bank, N.J., owning the remaining 29.5 percent.
In return, Oxy is buying a 21 percent stake in Lyondell for an amount based on Lyondell's per-share stock price when the deal closes. Based on Jan. 31 prices, Oxy would pay between $420 million and $476 million for the Lyondell share.
Oxy is making the deal to gain ``broader exposure to chemicals markets, not just petrochemicals,'' said spokesman Lawrence Meriage.
In a Jan. 31 news release, Dan Smith, Lyondell president and chief executive officer, said the structure of the two-way sale ``allows Lyondell to conserve cash at the trough of the chemical cycle, while increasing our proportionate share of Equistar's cash distributions as the cycle improves.''
News of the deal came the same day Equistar reported the results of a horrific year in which the firm lost almost $300 million as sales plunged more than 21 percent.
Polymers such as PE and polypropylene make up about one-quarter of Equistar's sales, with the rest coming from petrochemicals such as plastics feedstocks ethylene, propylene and styrene. In 2001, the polymers segment posted a pretax loss of $126 million, with sales falling almost 16 percent.
Millennium has an option to participate in Lyondell's purchase of Oxy's Equistar stake. In a Jan. 31 conference call, Millennium President and Chief Executive Officer William Landuyt said his firm ``was reviewing and evaluating the proposed transaction.''
Industry contacts said it was unlikely that Millennium would increase its stake in Equistar, since the firm publicly has stated its desire to exit the partnership.