(Aug. 13, 2007) — The resin market is again going through one of those periods where it changes identities like an insecure college freshman. Who will it be this week? A punk rocker? A hippie? A goth? A gangsta?
In the past three months, GE Plastics, Huntsman Corp. and Lyondell Chemical Co. each have been acquired in deals worth a total of $41 billion. The buyers, respectively, have been Saudi Basic Industries Corp., Hexion Specialty Chemicals Inc. and Basell Holding BV.
Each deal has its own list of merits for the buyers. Sabic wants to diversify beyond its lineup of basic plastics and chemicals. The other two deals are financial plays, although they're fronted by plastics and chemicals companies. Hexion is controlled by private equity firm Apollo Management LP, while Basell is owned by the Access Industries Inc. investment firm.
Of the three, Sabic is expected to have the most long-term interest in its new toy. Few would be surprised if Apollo and Access have Huntsman and/or Lyondell — or some combination of old and new assets — back on the market in five years or fewer.
Add to that list separate deals in which, first, Nova Chemicals Corp. and Ineos Group, and then, Dow Chemical Co. and Chevron Phillips Chemical Co. LP combined their polystyrene businesses. Both those deals were announced in April. As a result, there are now only three major PS producers left in North America, with Total Petrochemicals USA Inc. the only one standing alone.
Lyndhurst, England-based Ineos has been the most manic of the acquirers. The firm first bought a North American PS plant from BASF AG in mid-2005, then made its biggest splash later that year by dropping $9 billion to acquire the Innovene polyolefins and olefins business from British Petroleum plc.
After catching its breath in 2006, Ineos has made three deals in 2007, buying the PVC unit of Norsk Hydro ASA of Norway, the polyolefins and olefins business of Borealis A/S of Norway, and a controlling stake in the ABS unit of Lanxess AG of Germany. Those three deals took another $1.3 billion out of Ineos' bank account.
So is all of this board-game-style wheeling and dealing good for processors? In most cases, there won't be much of a change. Most of the deals don't involve direct competitors or focus on specific geographies. The exceptions, of course, are the PS mergers, where Dow-Chevron Phillips and Nova-Ineos will realize they don't need two of everything to sell the same product.
Processors' main concerns revolve around the increased clout the few remaining suppliers will have and whether a new owner will have the same focus on improving materials and serving customers.
The only thing that's relatively certain as the industry moves ahead — and into an area where commodity resins chug along with low growth rates in the developed world — is that we haven't seen the last of these kinds of deals. When Dow announced its acquisition of legendary Union Carbide Corp. in 1999, a certain amount of shock was heard within the industry. Less than a decade later, larger plastics and chemical deals are met with much less alarm.
Esposito is a Plastics News senior reporter based in Akron, Ohio.