CHEMICAL & ENGINEERING
NEWS OF THE WEEK JANUARY 20, 2003 - EDITED BY JANICE LONG & AALOK MEHTA
NYLON
DEALS
BASF, HONEYWELL SWAP BUSINESSES BASF bolsters engineering plastics; Honeywell restructures portfolio
B
ASF WILL TRADE ITS NYLON
fibers business for Honeywell's nylon engineering plastics business. Observers say the deal plays to the strengths of both companies and will create more formidable competitors in nylon fibers and engineering plastics. As part of the deal, Honeywell will get all of BASF's nylon fibers business, which generated about $350 million in sales in 2 0 0 1 . Honeywell will receive a $170 million cash payment upon the close of the deal, expected in the first half of the year, following regulatory approvals. Honeywell will combine the BASF operations with its own nylon carpet fiber and specialty fiber businesses, which include nylon, polyester, polyethylene naphthalate, and Spectra polyethylene fibers. Combined annual sales in nylon alone will be more than $1 billion. BASF will receive Honeywell's engineering plastics business, which likewise generated about $350millionin sales in2001. BASF will get an $80 million payment from Honeywell within ayear after the deal closes. The Honeywell business, consisting mostly of nylon 6 resins and compounds, will be absorbed into BASF's engineering plastics business, which includes nylon, polybutylene terephthalate, acetal copolymers, polyethersulfone, andpolysulfone. The transaction is part of a restructuring of Honeywell Specialty Materials spearheaded by HTTP://WWW.CEN-ONLINE.ORG
Nance K. Dicciani, who became president and CEO of the unit in late 2 0 0 1 , soon after General Electric abandoned its attempts to acquire Honeywell. Other recent moves include the sale of an Italian fine chemicals plant and a printed circuit board business. "The plastics transaction will allow us to exit a noncore compounding business," Dicciani says. "The nylon transaction represents a unique opportunity to create a fully integrated business with the scale and synergies to make it a more valuable asset." Don MacDougall, a J P Morgan analyst who covers Honeywell, likes the trade. "We believe the deal looks good from a financial standpoint, as Honeywell gets a business with almost double the profitability of the unit it sold and brings a net $90 million of cash in the door," he says. "Honeywell should create a much stronger and more attractive nylon fiber business with this transaction, a close second to DuPont." The BASF assets being transferred to Honeywell include a Charlotte, N.C., headquarters; polymerization and fiber plants in South Carolina and Ontario; and a carpetfibersplant in Shanghai. Not included are BASF's fibers intermediates plants. In return, BASF will receive Honeywell plants in Virginia,Tennessee, Germany and South Korea that polymerize or compound nylon plastics. With the addition of the Honeywell assets, BASF's engineering
plastics and nylon intermediates business will generate annual sales of about $2 billion. The company says the swap with Honeywell will help it reach its goal of being one of the top three suppliers in all of its businesses and will enhance its geographic reach. Louis N. Kattas, aplastics consultant with Mt. Olive, NJ.-based BRG Townsend, says the acquisition will improve BASF's profile in North America, where it isn't as strong in nylon or the higher-end engineering plastics as it is in Europe. "BASF gains assets, but it also gains exposure," he says. The Honeywell business will boost BASF from number four to number two in the nylon sector in North America. In Europe, it will enhance its number one po-
WELL IN HAND A worker digs into a vat of Honeywell's nylon resin.
sition.-ALEXTULLO
CONSOLIDATION Honeywell's nylon units bump BASF to number 2 in North America Ticona
DSM other
DSM
Other
BASF 25%
Solutia 16%-
BASF 11%
>
Honeywell 21% North American market = 500,000 metric tons
Rhodia 19% DuPont 18% European market = 600,000 metric tons
NOTE: Markets for nylon 6 and 6,6 in 2001. SOURCE: BRG Townsend
C & E N / J A N U A R Y 2 0 , 2003
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