Imperial Chemical Industries (ICI, London, UK) continues to divest commodity chemicals in order to concentrate on specialty products. Its latest actions include the £1.7 billion sale of polyurethanes, titanium dioxide and selected petrochemicals businesses to Huntsman Chemical Corp. (Salt Lake City, UT). It will also sell most of its global automotive refinishing and industrial coatings units to PPG Industries Inc. (Pittsburgh, PA) for £425 million.
The first transaction includes polyurethanes, titanium dioxide, and paraxylene. It nearly doubles the size of Huntsman, North America's largest privately owned chemical company, to more than $7.5 billion. The urethanes and titanium dioxide businesses both have solid technology positions and major global markets.
A German automotive refinisher repairs a car using a PPG waterborne system designed to reduce emissions to comply with increasingly stringent environmental regulations. The purchase of ICI's global automotive refinish and industrial coatings operations augments PPG's already-strong franchise in this field.
The deal suddenly makes Huntsman a major presence in 11 countries. It also increases Huntsman capacity by 8.7 billion lb/y, to more than 28 billion lb/y, and adds 7000 to its payroll, bringing it to 16,000. The companies expect to close the deal this summer. Huntsman also says it is interested in purchasing ICI's acrylics business, which is also up for sale.
The purchase involves three segments:
- Polyurethane: ICI operates facilities in Wilton, UK; Rozenburg, the Netherlands; and Geismar, LA; with an aggregate net asset value of £523 million. Total capacity is just over 1 billion lb/y, mostly in MDI-based materials though ICI also manufactures some TDI-based materials as well as polyols. It has 50 sales/representative offices worldwide. In 1998, the business achieved a trading profit (after corporate charges) of £90 million on sales of £816 million.
- Titanium dioxide: ICI's Tioxide titanium dioxide business has manufacturing sites in Canada, France, Italy, Spain, United Kingdom, and Malaysia, and joint ventures in South Africa and the United States. Its total nameplate capacity approaches 1.3 billion lb/yr with an asset value of £661 million. Trading profits were £58 million on sales of £574 million.
- Petrochemicals: Huntsman will purchase ICI's aromatics business (primarily benzene and paraxylene, which is used in polyester and polyurethane production) and ICI's share of olefins production (chiefly ethylene and propylene for polymers) from the cracker at Wilton, Teeside. The assets are valued at £96 million. The business lost £27 million on sales of £659 million in 1998.
Huntsman will acquire the businesses by forming a new company, Huntsman ICI Holdings (HICI) in partnership with ICI. HICI will include Huntsman's US propylene oxide business, which earned $79 million on $339 million sales in 1998. ICI will retain a £300 million investment in the new business for a minimum of three years. It will use the remaining £1.4 billion from the transaction to reduce debt incurred with its £8 billion purchase of Unilever's specialty chemical business in 1997.
ICI polyurethanes are used primarily for furniture and automobile padding, as well as appliance insulation, building insulation, adhesives and sealants, and binders. Huntsman moves onto new ground with the purchase of ICI's polyurethanes and titanium dioxide businesses.
The £425 million PPG transaction includes ICI's global automotive refinish and industrial coatings businesses (with the exception of its operations in the Indian subcontinent). This includes ICI's interest in automotive refinish coatings used in vehicle repair and on new and refinished commercial vehicles; the Grow Automotive solvents and thinners business in North America; and Asian and Latin American powder and liquid industrial coatings facilities.
The transaction is subject to regulatory approvals. PPG expects to complete the transfer of the European and the American businesses by midyear, and the Asian segments later in 1999. The units had total sales of £285 million in 1998, operating facilities in the United Kingdom, United States, Indonesia, and Malaysia. PPG expects 2850 ICI employees to come with the acquisition.
"This acquisition affords us the opportunity to expand businesses that have high priority for growth at PPG," says PPG chairman/CEO Raymond W. LeBoeuf said. "It is an excellent fit within our disciplined strategy for growing our higher-margin, less cyclical businesses."
For more information: Imperial Chemical Industries plc., 9, Millbank, London SW1P 3JF, UK. Phone: +44-171-834-4444.
Or: Huntsman Corp., 500 Huntsman Way, Salt Lake City, UT 84108. Phone: 801-584-5700. Fax: 801-584-5781.
Or: PPG Industries, Inc., One PPG Pl., Pittsburgh, PA 15272. Phone: 412-434-3131. Fax: 412-434-2011.