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Deal Fever Strikes Japan

Union of Mitsubishi Chemical and Mitsubishi Rayon could benefit both

by Michael McCoy and Jean-François Tremblay
August 17, 2009 | A version of this story appeared in Volume 87, Issue 33

Credit: Lucite
Mitsubishi Rayon acquired Lucite International soon after Lucite opened this methyl methacrylate plant in Singapore.
Credit: Lucite
Mitsubishi Rayon acquired Lucite International soon after Lucite opened this methyl methacrylate plant in Singapore.

Mitsubishi Rayon and Mitsubishi Chemical have formed separate joint ventures, the former with Saudi Basic Industries Corp. (SABIC) and the latter with two other Japanese firms. But overshadowing both deals are reports emerging from Japan that Mitsubishi Chemical is in talks to acquire Mitsubishi Rayon.

Mitsubishi Rayon and SABIC have agreed in principle to a joint venture that will build a $1 billion methyl methacrylate (MMA) complex in Saudi Arabia. The 50–50 venture will use an ethylene-based MMA process developed by Lucite International, a British company that Mitsubishi Rayon finished acquiring in June for $1.6 billion.

MMA has traditionally been manufactured by reacting hydrocyanic acid with isobutylene. Lucite’s process, in contrast, uses the cheaper raw materials ethylene, methanol, and carbon monoxide. Last fall, the company started up a 120,000-metric-ton-per-year MMA plant in Singapore that represents the first commercial application of the new technology. Soon after, Mitsubishi Rayon, itself a major MMA producer, announced its deal to buy Lucite.

Now, with SABIC, Mitsubishi Rayon plans to build a 250,000-metric-ton MMA plant plus a 30,000-metric-ton plant for polymethyl methacrylate, an acrylic polymer commonly sold as Lucite or Plexiglas. The plants are slated to start up in 2013 and will use ethylene and methanol supplied by SABIC.

Meanwhile, Mitsubishi Chemical’s new joint venture involves combining its fertilizer business with an existing fertilizer joint venture between Chisso and Asahi Kasei. The combined operation, to be called JCAM Agri, will have 335 employees and annual sales of more than $500 million.

Amid these news developments, however, Japan’s leading business newspaper, Nihon Keizai Shimbun , has reported that Mitsubishi Rayon is in talks to be acquired by Mitsubishi Chemical. Mitsubishi Rayon’s stock jumped by some 20% on Monday, Aug. 10, following publication of the story; Mitsubishi Chemical’s stock advanced nearly 5%.

With sales in its last fiscal year of $18.6 billion, Mitsubishi Chemical is Japan’s largest chemical company and the 14th largest chemical maker in the world, according to C&EN’s global Top 50 ranking (C&EN, Aug. 3, page 14). Mitsubishi Rayon’s annual sales are about $6.3 billion after its Lucite acquisition.

Neither Mitsubishi Chemical nor Mitsubishi Rayon is confirming or denying a deal. But a merger would make sense, says Shuichi Nishimura, a managing director at Nomura Securities, in Tokyo. Mitsubishi Chemical has been seeking ways to boost its portfolio of advanced materials while reducing its exposure to commodity chemicals. In addition to MMA, which is key to the production of liquid-crystal displays, Mitsubishi Rayon would bring carbon fiber, an advanced material used in an increasingly wide range of products, he says.

As for Mitsubishi Rayon, it has had a weak balance sheet since it acquired Lucite, Nishimura says. Committing to the project with SABIC will further increase Mitsubishi Rayon’s debt burden. By merging with Mitsubishi Chemical, Nishimura says, Mitsubishi Rayon “will have more options to grow its business.”



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