Wellman, Eastman Reevaluate Their Options in the Tough PET Market

In a restructuring of the polyethylene terephthalate (PET) resin industry, long-struggling U.S. producer Wellman is putting itself up for sale while Eastman Chemical is eyeing an exit from the business outside the U.S.

Wellman is tapping the investment bank Lazard Frères to explore its "strategic alternatives." The company says the private equity firm Warburg Pincus, which purchased a 26% stake in Wellman four years ago, is now ready to cash out.

The company hasn't turned a net profit since 2001. In a presentation to analysts last week, Wellman CEO Tom Duff said he expects the North American PET industry to increase capacity by roughly 600 million lb in both 2007 and 2008, outstripping the increase in demand. In addition, the foreign-owned firms StarPet and Mossi & Ghisolfi have both announced plans for U.S. plants that dwarf Wellman's largest facility, an 860 million-lb plant in Mississippi.

Meanwhile, Eastman says it will sell its non-U.S. PET plants by the end of next year to focus on the U.S., where it is shutting older capacity and favoring its new IntegRex technology. "At the end of 2008, we will have reduced our total PET capacity by almost half to approximately 800,000 metric tons, all of it based in North America," J. Brian Ferguson, Eastman's CEO, recently told analysts.

Up for sale are plants in England and the Netherlands, for which Spain's La Seda de Barcelona has already bid $250 million. La Seda bought a Spanish PET plant from Eastman earlier this year. Eastman has already inked an agreement to sell its two Latin American PET plants to Mexico's Grupo Alfa.