Air Products Restructures

Air Products & Chemicals is launching a restructuring effort intended to increase growth, improve return on capital, and return value to shareholders.

The company says it will sell its dinitrotoluene (DNT) plant in Geismar, La., to BASF; acquire specialty surfactants maker Tomah³ Products; explore the sale of its polyurethane intermediates, amines, and polymers businesses; and initiate a $1.5 billion stock buyback. In addition, Air Products will raise its quarterly dividend by 2 cents to 38 cents per share.

Combined 2005 sales for the units on the block were about $1.25 billion, some 20% of Air Products' total. "When these actions are completed, our growth businesses will make up over 60% of our overall annual revenues, up from just 35% in 2000," CEO John Jones says.

The sale of the DNT plant to BASF for $155 million is part of a restructuring of the firm's polyurethane intermediates business, which had 2005 sales of about $400 million. The plant is on BASF property, and the German firm has been its sole customer. Air Products is also considering the sale of a larger DNT/toluenediamine facility in Pasadena, Texas, that has multiple customers.

The amines business, which had 2005 sales of about $300 million, produces methylamines and higher amines at facilities in the U.S. and Brazil. Don Carson, a chemical stock analyst at Merrill Lynch, expects a financial buyer for this business to emerge.

The polymers business has two main units owned jointly with Wacker Chemie AG: one producing emulsions and the other making redispersible powders. Annual sales are about $550 million. Carson says Dow Chemical, Rohm and Haas, and BASF are potential bidders for these units.

Meanwhile, Air Products will pay $115 million for Tomah, which has annual sales of about $73 million and produces nonionic surfactants based on amine chemistry and alcohol alkoxylates. The two firms have had a commercial development agreement since 2004.