Issue Date: July 9, 2007
Lanxess readies Styrenics Sale
YET ANOTHER styrenic resins producer is finding a way out of the business. Lanxess has agreed to sell its Lustran Polymers acrylonitrile-butadiene-styrene (ABS) resins business to the privately held chemical company Ineos.
The transaction isn't a straightforward sale. By the end of September, the firms will form a joint venture, with 51% held by Ineos and 49% by Lanxess. Ineos will pay Lanxess about $48 million for this stake, and the joint venture will also assume about $41 million in Lanxess pension obligations.
Then, after a two-year period, Ineos will purchase Lanxess' minority stake for a second payment that will depend on the financial performance of the joint venture.
The Lustran business has been performing poorly for Lanxess, earning a mere $22 million before taxes in 2006 on about $1.2 billion in sales. Lanxess Chairman Axel C. Heitmann says the joint venture establishes a solution for the business and allows Lanxess to benefit from restructuring over the past two years. Steps have included moving some production from Dormagen, Germany, to Tarragona, Spain, and the pursuit of specialty ABS resins instead of less-profitable commodity grades.
The Lanxess deal isn't the only recent consolidation in styrenic polymers, which are experiencing sluggish growth and poor profitability due to high costs for benzene and other raw materials. "ABS has been a difficult business over the past 10 to 12 years," says Austin Peppin, managing director of consulting firm BRG Peppin.
In a move that mirrors Lanxess', Nova Chemicals is pooling its polystyrene and styrene assets in North America into a joint venture with Ineos. General Electric is selling GE Plastics, which has an ABS unit, to Saudi Basic Industries. And Dow Chemical and Chevron Phillips are forming a styrene and polystyrene joint venture in the Americas.
Lustran will give Ineos 600,000 metric tons per year of ABS capacity. "The agreed joint venture provides Ineos with strong market positions in a new portfolio of products that complement our styrenic, polyethylene, polypropylene, and polyvinyl chloride plastics activities," says Jim Ratcliffe, Ineos' chairman. Ineos also makes the ABS raw materials acrylonitrile, butadiene, and styrene.
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