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August 02, 2010 02:00 AM

Invista reviewing PET unit for possible sale

Frank Esposito
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    Invista has begun a review process that could lead to the sale of its North American polymer and resin unit — including its PET business.

    “Invista continually evaluates opportunities to maximize the long-term value of its businesses,” spokesperson Jodie Stutzman wrote in a July 26 e-mail. “Consistent with this approach, we are beginning a process to determine the market value of Invista's polymer and resins businesses in North America.”

    The company's 395 million-pound-capacity PET plant in Spartanburg, S.C., is one of the assets included in the review. Stutzman added that the review process “is expected to take place over the next several months, and could potentially result in a divestiture of one or more polymer and resins sites located in the U.S. and Mexico.

    “If, however, it is determined that other parties do not value the North American polymer and resins assets even more than Invista does, we plan to continue operating and driving strategies for each site that maximize long-term value.”

    Wichita, Kan.-based Invista now becomes the second North American PET maker to state publicly that it's conducting an asset review. Earlier this year, Eastman Chemical Co. of Kingsport, Tenn., confirmed it had hired Bank of America Merrill Lynch as its financial adviser to explore all options, including the potential sale of its PET unit.

    Potential buyers for the Invista PET business, according to market analyst Edgar Acosta at Dewitt & Co. in Houston, might include an Asian or Middle Eastern firm looking to gain an immediate presence in the North American market, or a PET end-user looking to integrate upstream into raw materials.

    PET makers have suffered from overcapacity and decreased margins, stemming from lower demand and from efforts made by the packaging industry — PET's largest end market — to use less PET per bottle. This lightweighting largely has been accomplished in bottles for water and carbonated soft drinks.

    Invista's engineering resins, specialty materials (including polyols) and European polymers and resins businesses are not included in the review.

    Acosta added that Invista's PET assets in Querétaro, Mexico — consisting of almost 1 billion pounds of annual capacity on two lines — may be more valuable than its U.S. PET plant because the Mexican operations are newer and more efficient. The Mexican site also could provide access to more lucrative markets in Central and South America, he said. But both the U.S. and Mexican sites are somewhat challenged in that neither is fully integrated on raw materials.

    The decisions that Eastman, and now Invista, have made regarding their PET businesses show a lack of willingness to invest in the market when previous good times faded, according to Acosta.

    “PET is a product that you have to go out and take to the market and innovate,” he said. “In any petrochemical business, you can manage for growth or you can manage to get the most profits at the end of the day. You can't do both.”

    After notching volume growth of 2-3 percent in 2009, North American PET is on track for 3-4 percent this year, Acosta added. “North America isn't a bad place to be [for PET], but prices are still relatively high and that won't allow for major growth,” he said.

    Invista is owned by Koch Industries Inc., which bought DuPont Co.'s Invista fibers unit in 2004 and combined it with its KoSa PET unit. In late 2008, Invista closed PET plants in Greer, S.C., and Millhaven, Ontario. Prior to those closings, Invista ranked as one of the region's largest PET makers, with a market share estimated at 24 percent, based on annual sales.

    The firm also entered the engineering resins market last year, saying it would begin production of nylon 6/6 resin at several locations, including Chattanooga, Tenn., and Kingston, Ontario.

    The launch coincided with the expiration of a non-compete agreement with DuPont. Invista officials have said their engineering resins business won't be affected by a related lawsuit filed by DuPont in late 2008.

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