Even before the hurricanes hit the Gulf Coast, three plastics and chemicals companies looking to go public were sailing into uncertain waters. Now, some might have to delay that journey.
British Petroleum plc's Innovene LLC unit, Arkema Group and the U.S. businesses of Formosa Plastics Group each plan to test the initial public offering market in late 2005 or early 2006. A Formosa entity would have annual sales of more than $3 billion, while a public Arkema would have $6.5 billion and Innovene would go public with a whopping $18 billion in annual sales.
But the hurricanes' impact on raw materials and logistics might cause those firms to wait a while before offering stock, according to Jeff Dancer, president of consulting firm Allan F. Dow Group LLC in Houston.
``I have to believe they're at least considering a delay until all of this uncertainty goes away,'' Dancer said in a recent phone interview. ``Markets don't like uncertainty, and this whole experience has awakened investors to the huge risks that can occur because of the weather.''
Arkema plans to proceed with its IPO in May or June, said spokesman Jim Bell. The stock will be listed on the Paris Bourse exchange. Formosa officials could not be reached for comment on the timing of that IPO. Innovene referred calls to a company lawyer, who could not be reached.
Innovene and Formosa have facilities on the Texas coast that are being affected by the recovery process. Innovene makes polypropylene in Alvin and polyethylene in Deer Park, while Formosa has a major PE, PP, PVC and feedstocks site in Point Comfort.
``All of the companies in that area are experiencing supply disruptions and crazy raw material costs,'' Dancer said.
The track records of the four plastics and chemicals firms that have entered IPO status in the past 18 months is a mixed bag, and one that might not give Innovene, Arkema and Formosa much guidance. The trio could succeed like Westlake Chemical Corp. and Lanxess AG, or struggle like Celanese AG and Huntsman Corp.
Of the three considering IPOs, Chicago-based Innovene, with a major global position in polyolefins and olefins, would seem to have the largest stature to attract market interest. Paris-based Arkema has some parallels to Lanxess, since both were spun off from larger European owners. Lanxess was part of German chemicals giant Bayer AG, while Arkema was part of French oil titan Total SA.
Since going public on the Frankfurt Stock Exchange in February, Lanxess' per-share stock price has climbed steadily from 15 euros (about $18) to its current 25 euro ($30) price.
Arkema's major plastic products are its European PVC resin, compounds, pipe and profiles business; specialty nylon resins; and acrylic resin and sheet sold under the Plexiglas and Altuglas trade names.
``Going into a public offering, there's no guarantee you're going to make money,'' Dancer cautioned. ``It sounds sexy, but there's no guarantee.''