Lyondell to Acquire ARCO Chemical for $5.6 Billion
Under the terms of the agreement, Lyondell will conduct a tender offer for all outstanding shares of ARCO Chemical at a price of $57.75 per share. As part of the transaction, Lyondell will assume ARCO Chemical's debt of approximately $870 million. The tender offer will begin on June 24. Atlantic Richfield Co. (ARCO), which owns 82.2% of the outstanding shares of ARCO Chemical, has agreed to tender its shares to Lyondell. Subject to customary conditions, the transaction is expected to close early in the third quarter. Any shares not tendered will be acquired in a second-step merger for cash at the same price.
Major Step in Lyondell Strategy to Increase Shareholder Value
"We believe this represents a unique opportunity to create value for Lyondell's shareholders. It is a major step in our strategy to grow and diversify Lyondell's earnings base. It further reduces the effects of the business cycles on our earnings by expanding into more profitable derivatives for the products we produce through our other businesses," said Dan F. Smith, Lyondell's President and CEO.
"This transaction will be significantly accretive to Lyondell's earnings," Smith said. "It expands the company into important new product lines, adds a significant technology component and provides us with a broader base for domestic and international growth. The acquisition complements our other businesses, since it is a significant consumer of propylene, ethylene and benzene, major products produced by Equistar, as well as methanol, produced by Lyondell Methanol Co. We believe there is additional value that can be captured through further cost reduction by integrating ARCO Chemical's operations with Lyondell's and Equistar's. In addition, Lyondell expects to realize significant tax benefits resulting from the transaction structure.
"We believe that this agreement capitalizes on the strengths of two premier chemical companies. The acquisition of ARCO Chemical's global leadership positions in propylene oxide and downstream derivatives along with advantaged technologies will enable Lyondell to diversify its earnings base and product portfolio while providing a platform for continued domestic and international growth," said Marvin O. Schlanger, President and CEO of ARCO Chemical. "Serving the customers of the new company will continue to be a top priority," Schlanger emphasized.
"The sale of our remaining interest in ARCO Chemical is economically more attractive than the sell down from 82 to 50% announced previously," said Mike Bowlin, ARCO Chairman and CEO. "The sale is consistent with our strategy of focusing resources and effort on growing our exploration, production, refining and marketing businesses."
The sale of ARCO Chemical will provide ARCO with after-tax cash proceeds of about $3 billion and result in an after-tax gain of approximately $1.3 billion. The proceeds from the sale will be used to reduce debt incurred from the company's purchase of Union Texas Petroleum, strengthen its balance sheet, and provide the financial flexibility necessary to invest further in the company's core businesses.
Lyondell has been on a growth rocket in the past 12 months. Last fall, it formed a partnership with Millennium Chemicals, Inc. to create Equistar Chemicals, LP, by combining both companies' olefins and polymers businesses. And earlier this year, Equistar expanded with addition of the ethylene, propylene and ethylene oxide and derivatives businesses of Occidental Chemical Corp. The expansion makes Equistar the world's second largest ethylene producer, with total annual revenues of almost $6 billion. Lyondell owns 41% of Equistar Chemicals.
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Domestic |
Foreign |
Total |
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Propylene Oxide and derivatives PO |
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Polyols |
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PGE |
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Butanediol |
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Toluene diisocyanate TDI |
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TDI Marketing-Europe |
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Methyl tertiary butyl ether MTBE (Bbls/day) |
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Styrene monomer (A) SM 2, |
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(A) As of May 15, 1998, approximately 1.5 billion pounds, or 40% of capacity, is committed under long-term processing arrangements. | |||
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ARCO Chemical Manufacturing Locations | |
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Location |
Major Products |
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NORTH AMERICA |
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Channelview, TX |
Propylene Oxide (PO) Styrene Monomer (SM)
MTBE Polyols Allyl Alcohol Butanediol (BDO) Tetrahydrofuran
(THF) N-Methyl-2-pyrrolidone (NMP) Gamma-Butyrolactone (GBL)
MPDiol Glycol (MPD) |
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Institute, WV |
Base Polyols |
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South Charleston, WV |
Polyols (Base/Polymer) |
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Lake Charles, LA |
Toluene Diisocyanate (TDI), Aliphatic Diisocyanates (ADI) |
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Pasadena, TX |
Propylene Oxide (PO), Tertiary Butyl Alcohol (TBA), Isobutylene Propylene Glycols (PG), Propylene Glycol Ether (PGE), TBHP TEBOL-99 TBA Propylene Carbonate |
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EUROPE |
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Fos-sur-Mer, France |
Propylene Oxide (PO) Tertiary Butyl Alcohol (TBA) Propylene Glycols (PG) MTBE Polyols |
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Rieme, Belgium |
Polyols |
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Rotterdam, The Netherlands |
Propylene Oxide (PO) Tertiary Butyl Alcohol (TBA) Isobutylene Propylene Glycols (PG) MTBE Propylene Glycol Ether (PGE) TBHP |
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ASIA PACIFIC |
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Anyer, Indonesia |
(Joint Venture with P.T. Polyols Gema Supra Abadi) |
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Chiba, Japan |
(50/50 Joint Venture with Propylene Oxide Sumitomo Chemical Corp.) Styrene Monomer |
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Kaohsiung, Taiwan |
Polyols |
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Related Equistar Chemical Manufacturing Locations | |
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Location |
Products |
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NORTH AMERICA |
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Channelview, TX |
Ethylene Propylene Butadiene Benzene Toluene Dicyclopentadiene (DCPD) Isoprene Resin oil Piperylenes Alkylate MTBE |
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Pasadena, TX |
(Bayport plant) Polypropylene Low-density polyethylene Polyols (Base/Polymer) |
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Pasadena, TX |
Ethylene oxide (Bayport Industrial District) Ethylene glycol Ethylene oxide derivatives |
Edited by Nick Basta