Growing It Alone

Kraton Polymers believes that for it the cliché fits: It has the best of both worlds. Independent from Shell Chemicals for three years, Kraton is more focused than when it was a small piece of a large global oil company. But the company still has a close relationship with its former parent that helps it retain some of its traditional muscle.

Shell sold Kraton to the investment firm Ripplewood Holdings in March 2001 as part of a divestment program aimed at shedding marketing-intensive businesses and retaining "closer to the oil barrel" commodity chemicals. Shell divested roughly 40% of its chemical arm, including its Resolution Performance Products epoxy resins unit, its polyethylene terephthalate business, and Kraton.

Late last year, Ripplewood sold Kraton to two other private equity firms, Texas Pacific Group and J. P. Morgan Partners, for $770 million. Though Ripplewood didn't disclose what it had paid for Kraton, it has said that the subsequent sale represented an "attractive return for its investors."

Garret A. Davies, vice president for the Americas at Kraton, agrees that Kraton Polymers has fared well as an independent company. "Ripplewood was very pleased with the performance of the business," he says. "We performed very well when it was tough for a lot of chemical businesses."

Davies, however, would never second-guess the nurturing that Kraton received from Shell for nearly 50 years. Kraton's roots are as a World War II government synthetic rubber project. In 1955, Shell bought the government's main asset--a Torrance, Calif., isoprene rubber facility--and used it as a laboratory for tinkering with alkyllithium salt catalysts. The company inaugurated its first commercial anionic polymerization plant on the site in 1959, invented styrene block copolymers (SBCs) there in 1961, and was selling SBCs to the footwear market three years later.

SBCs caught on, thanks to their unique chemistry. They are typically triblocks, meaning they have a polystyrene "endblock" segment, a "midblock" of polybutadiene or isoprene rubber, and another endblock of polystyrene. The "likes" in the various triblock copolymers tend to associate with other likes, providing a cross-linking that doesn't depend on covalent bonds between the various polymer molecules.

However, when SBCs are heated, the bonding between the triblocks falls apart, giving the polymer a low viscosity for fabrication. The domains form again when the polymer cools. As a result, SBCs have a processability advantage over elastomers such as thermoplastic polyurethane that rely on harder-to-control conditions.

SBCs are also highly compatible with other polymers and materials, according to Peter Pasman, Kraton's R&D manager for compounds and personal hygiene. With a polyolefin midblock and a polystyrene endblock, he says, they lend themselves to forming interactions with other materials. SBCs, therefore, are often compounded into polypropylene and polystyrene.

For instance, SBCs add so much resilience to the clear polystyrene drinking cups frequently used on commercial airlines that the cups can be turned inside out. SBCs are also easily formulated with asphalt for road and roofing applications and for adhesive tackifying resins.

But for future growth, Kraton says it isn't coasting on the momentum from past successes. Some 31% of its annual sales of more than $650 million comes from products developed within the past five years. R&D spending, the company maintains, is at the same level as it was under Shell. The company shares an R&D facility in Houston with Shell and can leverage analytical capabilities not normally available to a small company.

This R&D focus has led to new growth platforms for Kraton. One is its new Kraton A technology, where styrene is inserted into the midblock of the polymer. Pasman says this extra styrene increases the inherent polarity of the SBC, lending to overmolding applications like the rubbery strip found on many toothbrushes.

Similarly, the company is combining isoprene and butadiene in the midblock of the SBC to give improved thermal stability over styrene-isoprene-styrene, allowing SBCs to be formulated with a wider range of adhesives and compounds. Kraton is also introducing an improved durability and performance line for asphalt.

"I like to think we were the pearl inside the Shell."

IN ADDITION TO technology, Kraton says geographic reach is another advantage. It has plants in the U.S., Brazil, France, Germany, the Netherlands, and Japan. And the company is continually expanding on this base. It is doubling capacity for Kraton G--its line of saturated SBCs--at one of its Belpre, Ohio, plants by the fourth quarter of this year. It is also expanding capacity for its Kraton D unsaturated SBCs in Paulinia, Brazil by 25%. The company recently completed Kraton D and G expansions in Berre, France.

The expansions are in response to high industry growth. SBCs, the company says, are a 2 billion-lb-per-year industry globally, but major segments like adhesives, compounding, and roads and roofing are still growing at a nearly double-digit clip.

Davies says independence has made Kraton more nimble. "One of the biggest changes is that we've been able to focus. There has been a lot more focus throughout the organization," he says.

However, in addition to R&D, the company still enjoys some of the benefits of its former ownership by Shell, including feedstock supplies and the sharing of manufacturing infrastructure at sites such as Shell's oil refinery and chemical complex.

Davies believes that among the companies Shell sold off, Kraton is special. "I like to think we were the pearl inside the Shell," he says.