Three Interesting Little Chemical Deals

This week hasn’t seen much in the way of big news in the chemical sector, but there has been a spate of little transactions that are much more interesting than their sizes would indicate. DAK Americas is purchasing the PET business of Wellman Inc. for $185 million. Some thoughts and observations:
1) I’m a little surprised that Mossi and Ghisolfi didn’t buy the unit. After all, DAK had just purchased Eastman’s U.S. business and Indorama has just completed its acquisition of Invista’s North American polyester unit. I am under the impression that M&G was looking at Wellman while that company was going through Chapter 11. In May, M&G announced it was building a 1 million-metric-ton PET unit in the U.S. I suppose that suggestions another strategy. 2) A DAK spokesman told me that his company was interested in Wellman’s ThermaClearTi technology for making hot-fill containers. This will be a new business for DAK. Wellman had sued Eastman over that technology. Being that both businesses are now under the DAK umbrella, those issues are probably resolved.
Eastman is buying Sterling Chemicals for $100 million:
1) This deal is pretty slick. This isn’t even a bolt on acquisition; this is a pretty seamless weld-on acquisition. Eastman knows acetic, though all of Sterling’s acetic goes to BP. Also, Sterling idled its phthalate ester plasticizer plant earlier this year after BASF terminated its offtake agreement. Eastman will restart that as a non-phthalate plasticizer plant. Last year, Eastman purchased Genovique for its benzoate plasticizers. 2) Moreover, Eastman says the deal is accretive in 2012. So it is financially pretty seamless as well. 3) BASF’s termination involved restrictive covenants on Sterling producing phthalate esters and phthalic anhydride. I wonder if this spells legal trouble between BASF and Eastman down the road. I don’t know why BASF didn’t fork over the $100 million to keep a competitor from buying the facility. 4) Sterling was a Gordon A. Cain joint. He formed Sterling in 1986 to buy Monsanto’s petrochemical business.
PetroLogistics, which opened a 1.2 billion-lb propane dehydrogenation plant in Houston last year, has filed for a $600 million IPO:
1) PetroLogistics did a great job of reading the tea leaves of the U.S. shale gas trend. It concluded that North American crackers would crack more ethane and that there would be a resulting shortage of propylene. 2) The company’s ticker symbol is “PDH”, which is shorthand for propane hydrogenation. That it is a little cutesy for such a sharp penciled outfit. 3) The company makes one product, propylene, from one raw material, propane, primarily for three clients: Dow, Ineos, and Total Petrochemicals. These contracts will expire by 2014. I would think that Dow, which is building its own propane dehydrogenation capacity, isn’t coming back. 4) The proceeds seem to be going to the private equity owners of the company.

Author: Alex Tullo

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