Plastics additives leader Crompton Corp. has closed a previously announced, major deal with General Electric Co. that will increase Crompton's antioxidants business while allowing the firm to pay down more than half a billion dollars in debt.
In the deal, GE paid $633 million in cash for Crompton's organosilicones business. Crompton took over GE's Specialty Chemicals business as part of the transaction. Additional quarterly payments, based on the performance of the organosilicones unit and GE's existing silicones business, could net Crompton another $250 million in the next three years.
Crompton, based in Middlebury, Conn., said it will use income from the deal to pay down more than $525 million in debt and to contribute about $75 million to its pension plans.
The GE business acquired by Crompton is centered in a plant in Morgantown, W.Va. Crompton said the plant is the world's largest phosphites production site, with annual capacity of 200 million pounds.
Phosphites are used to make antioxidants, which are key plastics additives. The 200-employee site also produces a range of polymer modifiers, including impact modifiers and coupling agents, and has blending capabilities previously unavailable to Crompton.
The deal establishes Crompton as one of the world's three largest plastics additives makers, according to Executive Vice President Myles Odaniell.
``We were already one of the leading global suppliers of additives, and this makes us even larger in overall size,'' he said.
Products produced in Morgantown are used in flexible PVC, polyolefins and rubber. The blending capability will allow Crompton to create additive packages that combine antioxidants with lubricants, slip agents and other additives. Previously, Crompton had used tolling arrangements to produce such additive packages.
Odaniell, who joined Crompton in June after more than two decades at Cytec Industries Inc., described the Morgantown site as ``an excellent facility with a good, solid plant.'' He said Crompton has no plans to change staffing levels at the site.
Crompton - whose businesses include ethylene propylene diene monomer production and the Davis-Standard plastics machinery unit - now has ``a significant position in each major segment of the [plastics] value chain, from monomers to polymerization to finishing, compounding and fabrication,'' Odaniell said.
In the first half of 2003, polymer additives accounted for about half of Crompton's total sales of $1.1 billion. The unit's first-half sales were up 8 percent vs. the same period in 2002. Sales in the Davis-Standard unit were down 14 percent to $81.7 million in the same period. Overall, Crompton lost $26.1 million from continuing operations in the first half.
On Wall Street, Crompton's per-share stock price was around $5.60 in late trading Aug. 26. It had been around $10 as recently as September.
Crompton also is one of 14 additives firms accused of price fixing in June lawsuits filed by a group of compounders and pipe makers in U.S. District Court in Philadelphia.
Crompton officials have said the firm is cooperating with authorities and has conditional amnesty regarding criminal charges in the United States, Canada and Europe for heat stabilizers, its largest product group.