The parent firms of polyethylene maker Equistar Chemicals LP are getting hitched.
Lyondell Chemical Co. of Houston and Millennium Chemicals Inc. of Hunt Valley, Md., are tying the knot in a deal that will create North America's third-largest chemicals firm. The combined, Houston-based firm would retain the Lyondell name and would have annual sales of more than $11 billion.
Equistar, formed in 1997 as a joint venture between Lyondell and Millennium, is one of North America's largest PE makers, with about 12.5 billion pounds of annual capacity. In addition to Equistar's PE and ethylene holdings, Lyondell is a major producer of propylene oxide and propylene glycol, while Millennium is a leader in the titanium dioxide market.
The deal includes a stock swap in which Millennium shareholders will receive about $1 billion. Lyondell also will assume about $1.3 billion in Millennium debt.
Dan Smith, president and chief executive officer at Lyondell, will keep those titles. He said the deal will save the companies at least $50 million annually.
``This is the right move at this juncture for Millennium,'' Millennium President and Chief Executive Officer Robert E. Lee said.
Each of the three businesses lost money last year, even though sales improved. Equistar lost $339 million as sales climbed 18 percent to more than $6.5 billion. Lyondell lost $302 million while sales were up 15 percent to about $3.8 billion. And Millennium posted a $184 million loss, with sales up almost 10 percent to $1.7 billion.
Jerry Laird, a market analyst with the Phillip Townsend Associates consulting firm in Houston, said he was unsure how much synergy Equistar could gain from the deal, since the PE businesses already have been operating together for several years.
But Laird also credited Equistar with rationalizing the assets of the two firms.
``Equistar started out with really diverse and very different assets, and they've done a good job at step-by-step rationalizing to lower costs while keeping their customers happy,'' Laird said.
Having Equistar all under one roof also may create ``better clarity in how the business will be run,'' Laird added.