Momentive And Hexion To Merge

Private equity firm Apollo Management said last week it will merge Hexion Specialty Chemicals and Momentive Performance Materials, both companies it controls, into a single specialty chemicals and materials maker. The combined firm, which will take the Momentive name, will have annual sales of about $7.5 billion.

Hexion, the larger of the two firms, is a leading supplier of thermosetting resins for binding, bonding, and coating. Apollo created the company in 2005 from its earlier acquisitions of Borden Chemical, Resolution Performance Products, and Resolution Specialty Materials. Hexion has continued to grow by buying Bakelite and six other companies.

Apollo acquired Momentive, a maker of silicones and specialty quartz, from General Electric in 2006. Prior to the purchase, Momentive had been GE’s Advanced Materials division.

Craig O. Morrison, CEO of Hexion, will become chairman and CEO of the combined company when the merger is complete, which Apollo expects to happen on Oct. 1. The new Momentive will have 10,000 employees and 117 manufacturing facilities around the world.

The new Momentive’s $7.5 billion in sales will make it the second-largest specialty chemical firm in the U.S. after Huntsman Corp. and the 10th largest U.S. chemical company overall, according to C&EN’s latest ranking of the Top 50 U.S. chemical makers (C&EN, May 10, page 23).

Executives insist that the merger is not being undertaken for cost reasons. “It’s a tremendous opportunity to build a global leader. Both firms are global in nature and together offer a broad portfolio range,” says Peter F. Loscocco, Hexion’s vice president for public affairs. The companies offer little overlap in terms of businesses, Loscocco acknowledges.

Meanwhile, industry watchers will look for signs that Apollo will spin off the combined firm in an initial public offering of stock. “Although both companies are sizable enough to go public independently, there’s no doubt if you put them together you create a much larger entity, which institutional investors who want a certain weighting in the chemical sector would want to own,” observes Telly Zachariades, a partner at chemical mergers and acquisitions consultancy Valence Group.