Out On Its Own

For Mark Henning and the men and women who work for him, the nitroalkanes producer Angus Chemical is a test case in an age-old business debate: Do businesses do better as part of big corporations or on their own?

Henning, 55, is chief executive officer of Angus, which has been a stand-alone company since February when Dow Chemical sold it to the private equity firm Golden Gate Capital for $1.2 billion. He’s determined to double Angus’s $500 million in annual sales in the next five years, a rate of growth that eluded the company when it was part of Dow.

“Do we have the potential to grow at double-digit rates? Absolutely,” Henning says emphatically. “There are a lot of distractions that come from being part of a $60 billion company that you no longer have when you’re on your own.”

But the track record for spin-offs in the chemical industry is mixed. Private equity firms such as Arsenal Capital Partners have made a successful business of buying and revamping big-company units. But marquee bankruptcies over the years by spin-off firms such as Solutia, Tronox, and Kem One are reminders of the risks involved.

Ed Hoozemans, CEO of United Initiators, a maker of peroxide-based initiators spun off from Evonik Industries in 2008, says he’s confident that his firm increased its sales and earnings more than it would have had it stayed part of Evonik.

Hoozemans credits quicker decisions, more focus, and investment in United’s core capabilities. But he acknowledges challenges in building up and enhancing his company’s administrative infrastructure and in connecting its pieces into an independent global company.

Running the independent Angus is a job Henning was made for. Dow acquired Angus in 1999, and Henning, already a 15-year Dow veteran, became its chief operating officer two years later. In 2009, he was called away to run Dow’s biocides business. But last year, Dow decided to sell Angus, and Henning saw an opportunity to return to a business he loved.

He retook the helm of Angus early in 2014 and led the company through the sale process. For its $1.2 billion, Golden Gate got a company with roots that go back to 1935 when Purdue University chemist Henry B. Hass invented a way of synthesizing nitroalkanes. Purdue later licensed the technology to an Angus predecessor. The Angus name comes from the business’s years in the 1980s as a subsidiary of Alberta Natural Gas United States.

To this day, Angus’s plant in Sterlington, La., is the sole place in the world where a full line of nitroalkanes is produced. Angus’s only competition is a handful of Chinese firms that make nitromethane.

The unique company had no obvious fit inside Dow, but it gained from being part of the larger firm, Henning recalls. “Dow has some of the best operational discipline and operations technology in the chemical industry, and Angus benefited from that,” he points out.

Dow sought out Angus as part of a specialty chemical push, and for years Angus fulfilled its role as a specialties star in a largely commodity company. But that star dimmed in 2009 after Dow acquired the specialty chemical giant Rohm and Haas. Soon thereafter, Henning says, Angus’s growth rate started to slow to the low-single digits.

Henning is confident he can recapture the growth of Angus’s earlier years, and one person he is calling on for help is G. David Green, the firm’s vice president of R&D. A Ph.D. organic chemist with a passion for new product development, Green is a big reason Henning can boast that Angus developed 10 new-to-the-world molecules in the past 10 years.

Angus produces nitroalkanes via the vapor-phase nitration of alkanes. Reaction with aldehydes creates nitroalcohols, which are reduced to the corresponding amino alcohols. More specialized derivatives, such as oxazolidines and oxazolines, are produced by combining amino alcohols with aldehydes or acids.

One of Green’s favorite new products is 3-amino-4-octanol, a metalworking fluid additive Angus sells as Corrguard EXT. As Green tells it, Angus chemists developed the product after learning from customers in the metalworking fluid industry that the removal of undesirable ingredients such as boric acid and formaldehyde-releasing biocides was causing the fluids to deteriorate prematurely.

Armed with the knowledge that the carbon content of amino alcohols has an impact on the longevity of biocide-containing fluids, Green and his team started experimenting. “We found that eight- or nine-carbon amino alcohols were ideal for helping biocides do their job,” he says.

Another new product came as a result of watching the patent literature. A patent by India’s Ranbaxy Laboratories on an antimalarial drug indicated that a key raw material required cyanide chemistry. “We realized that we could make it with our chemistry, so we got in touch to let them know,” Green says.

In 2012, Ranbaxy launched the compound, arterolane, as part of a malaria treatment it calls Synriam. Rather than a cyanide compound, Ranbaxy synthesizes the drug using a nitroalkane-derived diamine.

Like Henning, Green appreciates what he had with Dow. “Dow allowed us to perform research with a lot of support. Dow’s analytical group in Midland, Mich., is world-class,” he says.

But Green is happy that he won’t have to compete for R&D resources with Dow’s big businesses. And like United’s Hoozemans, Green is enjoying a newly streamlined decision-making process. “Everyone who is needed to make a decision is in the room,” he says.

Unlike Hoozemans, Henning isn’t concerned about replicating administrative infrastructure. “Anything in the back office that we don’t need Angus expertise to execute, we look to outsource,” he says. “We don’t want to be distracted.”

Similarly, Henning is using his new autonomy to pare down a bloated list of software and systems. In preparing Angus for separation, he learned that fully 35 operating systems were being deployed at the Sterlington plant. Working with the consulting firm Accenture, he has trimmed that list to just three.

In keeping with his desire to focus on the chemistry Angus knows best, Henning doesn’t see a big role for mergers and acquisitions. “We have an abundance of growth opportunities without acquisitions,” he says.

Notably, Henning sees more potential for 2-amino-2-methyl-1-propanol, already the firm’s biggest-selling product. Paint companies add AMP to their products to impart high-end properties such as scrub resistance, freeze-thaw stability, and enhanced pigment dispersion.

Increasing consumer preference for premium paints favors AMP, but use was threatened by the Environmental Protection Agency’s classification of AMP as a volatile organic compound. In October 2012, Angus submitted a VOC-exemption petition after its tests concluded that AMP meets the agency’s no-VOC benchmarks. EPA granted the exemption in July 2014.

For his part, Green is eager to explore other branches of nitroalkane chemistry. For example, the conversion of nitroalkanes to nitroalcohols is known as the Henry reaction. But if an amine is included—a Mannich reaction—the result is nitroamines, which can be converted to polyamines and polyamino alcohols.

“We can build a large degree of polyfunctionality into a very small molecule,” Green says. Potential applications include cross-linking agents for adhesive curing.

Henning wants to support such new product development, and he says Angus’s new owners are letting him do it. In recent months, Angus hired dozens of sales and technical service people. Research and development, along with marketing, is now getting attention, he says.

“We actually do R&D at the molecular level. The number of companies doing that today is limited,” Henning says. “We have a strong capability to bring out new-to-the-world chemistry.”