Another shake-up has hit the North American PET resin field, with DAK Americas LLC buying the PET business of Wellman Inc. in a deal valued at $185 million.
The deal — consisting of a cash payment and assumption of some liabilities — includes a 950 million-pound-capacity PET plant in Bay St. Louis, Miss., where Wellman is based. That plant employs 165.
The purchase “will allow DAK to continue to innovate and cost-effectively serve ever-growing customer needs,” DAK PET resins business director Tom Sherlock said in a June 16 news release.
When the deal is completed later this year, DAK will become North America's largest PET maker, with a market share of almost 40 percent of capacity. DAK had been in a virtual tie with Indorama Public Ventures Co. Ltd. for top market share, with each holding about 30 percent of capacity.
Late last year, DAK bought the PET business of Eastman Chemical Co., including a plant in Columbia, S.C., for $600 million in cash. Shortly after that deal was announced, Indorama Public Ventures Co. Ltd. confirmed its purchase of the PET resin and fibers business of Invista for $420 million. That deal included plants in Spartanburg, S.C., and Querétaro, Mexico.
In a June 17 phone interview, DAK spokesman Ricky Lane said the Wellman plant is attractive to DAK for a number of reasons, including the fact that it's only about 10 years old.
“We consider the [Wellman] plant's technology to be very modern,” Lane said. “The plant has a lot of life left in it.”
He added that the plant's product slate will allow DAK to have more access to hot-fill product markets. And although the plant has been operating under force majeure conditions because of challenges in acquiring purified terephthalic acid feedstock, Lane said the plant “has no [feedstock] issues on a long-term basis.”
Michael Dewsbury, a former Wellman executive who's now a market analyst with Resin Technologies Inc. in Fort Worth, Texas, said that he wasn't surprised that the Bay St. Louis plant was sold, but he added that he thought the $185 million sale price might be a bit high.
DAK “might have been able to build new capacity for less than that,” Dewsbury said. He added that the higher price leads him to believe that the deal “is strictly a consolidation play” where DAK has removed a competitor in order to improve its pricing power in the market.
“If [DAK] is paying that kind of money, you have to ask yourself what their reasons are,” Dewsbury said.
The deal also could make things more challenging for North American PET resin buyers, he added, since almost 90 percent of capacity now is in the hands of only three producers — DAK, Indorama and M&G Group of Houston.
The only other active suppliers in the region are Nan Ya Plastics North America Inc., with a market share of about 5 percent, and Selenis Canada, which started production at a retrofitted plant in the Montreal area earlier this year. But the Selenis plant is relatively small, with less than 400 million pounds of annual PET capacity.
The North American PET field has struggled in recent years with low-single-digit growth rates and excess capacity, although export sales did improve in the second half of 2010.
The industry also has been greatly affected by lightweighting, which has reduced the amount of resin used in carbonated soft drink and water bottles.