Eastman Reviewing Strategic Options For PET
Eastman Chemical has put out a euphemistic “reviewing strategic options” press release regarding its polyethylene terephthalate resins business. “Strategic options” usually means divestiture, though companies normally insist that other means of disposal, such as a joint venture or initial public offering for the business, are possible.
And the term is open ended enough that companies won’t lose face if they decide to hold off on plans to unload the business if it can’t be sold quickly.
But given that “divestiture” is the only option Eastman mentioned and that it named Merrill Lynch as its financial advisor for the strategic review, what Eastman has in mind is almost certainly a sale.
Eastman’s PET business makes up lion’s share of its performance polymers reporting segment, which has been struggling in recent years. In 2009, it generated an operating loss of $66 million on sales of $719 million. The year before, it lost $57 million on $1.1 billion in revenues.
The company makes PET resins in Columbia, S.C., where it runs a 535,000-metric-ton-per-year plant that uses its IntegRex technology, a process that Eastman developed in the early 2000’s to closely integrate purified terephthalic acid and PET production.
The Eastman decision shouldn’t come as a surprise. In 2007 and 2008, the company exited its PET operations outside of the U.S. It sold a Spanish PET plant to La Seda de Barcelona. It also unloaded plants in Argentina and Mexico to Grupo ALFA, the Mexican conglomerate that owns U.S. PET resin maker DAK Americas. And, it disposed of a PET plant in the U.K. and PET and purified terephthalatic acid plants in the Netherlands to Indonesia’s Indorama for $354 million.
Incidentally, Eastman is suing both DAK Americans and Indorama for infringing on its IntegRex patents.
Those same years Eastman shut down some 400,000 metric tons of PET capacity, though it did convert some of the capacity to specialty polyester copolymer production.
Eastman has been insinuating that it had put the PET business on notice. During the company’s fourth quarter conference call, CEO Jim Rogers said the company had overcome operational issues that had prevented the IntegRex plant from running at full operating rates. And he noted that he wanted the company to move into higher-profit, value added PET market segments. “The real test,” he said, “is going to come in the second quarter to see just how much our guys have been able to go about demonstrating to the markets that we got our act together.”