Thailand-based polyethylene terephthalate (PET) giant Indorama Ventures has agreed to pay $795 million for Old World Industries’ chemical business, which operates the largest ethylene glycol plant in the U.S.
The business consists primarily of a complex in Clear Lake, Texas, that has 800 million lb of capacity per year for ethylene glycol, a key PET raw material. The plant also makes coproduct diethylene and triethylene glycol, as well as purified ethylene oxide, used to make ethoxylates for the detergent industry. The business had before-tax profits of about $158 million in 2011 on sales of $567 million.
Old World purchased the glycol plant from Celanese, which still operates it, in 1999 for an undisclosed price. At the time, Old World sought its own supply of ethylene glycol for its Peak brand antifreeze as suppliers such as Dow Chemical and Union Carbide were consolidating.
Old World founder Tom Hurvis says the sale will allow Old World to focus on its automotive aftermarket business. The company is entering a glycol supply agreement with Indorama.
Indorama has become one of the largest U.S. producers of PET in less than a decade. The company gained a foothold in the U.S. when it purchased a PET plant in Asheboro, N.C., in 2003. It built a plant in Decatur, Ala., in 2009 and acquired Invista’s North American PET business in 2011. Indorama says the glycol plant purchase provides backward integration.
Doug Rightler, a consultant with PCI Xylenes & Polyesters, says Indorama is buying the business at an opportune time: No significant new glycol capacity has opened for the past two years, and little new capacity is expected in the coming years. The glycol market, he says, will be sold out and very profitable at least through 2015.
Even though Indorama is paying a steep price for the facility, Rightler says, it should recover its investment in four or five years. Additionally, Indorama is one of the world’s largest buyers of ethylene glycol, and having its own plant should give it leverage with its suppliers and open the door to swap arrangements around the world to reduce freight costs.