Chemical Deal Fever Strikes Japan

The Japanese companies 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 potentially eclipsing both deals, reports are emerging from Japan that Mitsubishi Chemical is in talks to acquire Mitsubishi Rayon in what would be a major consolidation of the Japanese chemical industry.

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, 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 known as Lucite or Plexiglas. The plants, slated to start up in 2013, will use ethylene and methanol supplied by SABIC.

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

Amidst these news developments, the Japanese business newspaper known as the Nikkei, reported that Mitsubishi Rayon is in talks to be acquired by Mitsubishi Chemical. In a sign of the newspaper's credibility in Japan financial circles, Mitsubishi Rayon's stock jumped by some 20% on Monday, Aug. 10, following publication of the story.

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 11). After the acquisition of Lucite, meanwhile, Mitsubishi Rayon has annual sales of about $6.3 billion.

On Monday, Mitsubishi Chemical released a statement that neither confirmed nor denied the newspaper report. "It is true that we are making various examinations" into mergers and acquisitions, the statement said, "but we have nothing to disclose for the present."