Pssst ... hey, buddy... wanna buy 17.6 billion pounds of polypropylene capacity?
That's the question officials at BASF AG and Royal Dutch/Shell group will be asking as they decide what to do with Basell Polyolefins Co. NV, their 50-50 joint venture. Basell, based in Hoofddorp, the Netherlands, ranks as the world's largest PP maker, including a market-leading 25 percent share in North America.
London-based Shell and BASF of Ludwigshafen, Germany, announced in a July 29 news release their intentions to find a buyer for Basell or spin off the unit as a separate public company.
``Going forward, Basell doesn't fit with the portfolio that Shell wants to have,'' Shell spokeswoman Bianca Ruakere said in a July 29 telephone interview from London. ``This is a good time to review our options.''
Since its formation in 2000, Basell and other polyolefin makers have been buffeted by slowing demand, overcapacity, lower profit margins and an overall weak global economy.
``The last four years have been a devilishly difficult and volatile period in the polyolefins industry,'' said Basell spokesman Randy Woelfel. ``But the opportunity and timing [of the sale] could be very good, as far as an upturn in the sector. This year, [Basell] is off to its best six-month start ever.''
In the release, Basell President and Chief Executive Officer Volker Trautz said Basell ``will not allow [the potential sale] to distract us.
``Meeting customers' needs will be the foremost business priority for Basell as the transaction process is carried forward,'' Trautz said.
The question now becomes just who would be in a position to buy a polyolefins company with $6.9 billion in annual sales, 6,700 employees, almost 18 billion pounds of PP capacity and almost 5 billion pounds of polyethylene capacity.
Robert Bauman, an industry analyst with Nexant Inc., a Houston consulting firm, places Exxon Mobil Corp. of Irving, Texas, and Saudi Basic Industries Corp. (Sabic) of Riyadh, Saudi Arabia, on the short list of potential Basell buyers.
Bauman added that he was a bit surprised by the timing of the announcement, since the global PP market appears to be on the rebound this year. Through May, U.S./Canadian PP demand was up almost 9 percent, according to the American Plastics Council in Arlington, Va.
``If [BASF and Shell] would wait a year, the value of Basell might go up considerably,'' Bauman said. ``But demand growth isn't a measure of anything, not even profitability.''
In North America, Basell employs about 1,000 and operates production sites in Pasadena, Texas; Westlake, La.; Varennes, Quebec; and Corunna, Ontario. Its North American headquarters is in Elkton, Md.
The Basell announcement is the second major tremor to hit the global PP industry this year. In May, British Petroleum plc of London announced plans to sell or spin off its olefins and derivatives unit, which includes the world's second-largest PP business.
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Basell by the numbers in 2003
Sales: $6.9 billion
PP capacity: 17.6 billion lbs.
PE capacity: 5 billion lbs.
North American breakout
Sales: $1.4 billionE
Source: Basell Polyolefins Co. NV, Hoofddorp, Netherlands