CHEMICAL & ENGINEERING
NEWS OF THE WEEK FEBRUARY 12, 2001 - EDITED BY JANICE LONG AND SUSAN MORRISSEY
BUSINESS
DOW COMPLETES CARBIDE DEAL Dow must sell several businesses, but will keep the key assets it wanted
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FTER A SEEMINGLY END-
less series ofdelays, it finally happened last week: Dow Chemical completed its acquisition of Union Carbide, creating what Dow calls "the world's leading chemicals, plastics, and agricultural products company" "We are ready to go," says Michael D. Parker, Dow's president and CEO. "This merger is going to create tremendous value." The deal was completed last Tuesday, just a day after the Federal Trade Commission (FTC) cleared it, but more than 18 m o n t h s after D o w first announced that it planned to buy Union Carbide. In between was a period of intense negotiation with federal antitrust regulators t h a t took much longer than Dow—or almost anyone else— expected. In the end, Parker contends, it was worth the wait. Combined, the twofirmshad sales of $28.4 billion last year, earnings before interest and taxes of $3.1 billion, and assets of more than $36 billion. And, Parker points out, the remedies reached with FTC leave intact all the strategic Union Carbide assets Dow sought in the first place. "None of the remedies surprised us and none changed the long-term value of the merger," Parker says. To satisfy FTC, Dow will sell its ethanolamines business to Ineos, the British company that has acquired several chemical businesses from ICI. Dow and HTTP://PUBS.ACS.ORG/CEN
Union Carbide were two of three U.S. producers of ethanolamines. Likewise, in ethyleneamines, where Dow and Carbide were the only U.S. producers; Dow's business will be sold to a unit of Huntsman Corp. To satisfy European Commission concerns, Dow is negotiating the sale of Union Carbide's half of Polimeri Europa, a polyethylene venture with EniChem that had sales last year of $ 1.2 billion. The stickiest negotiations surrounded a monopoly position the combined company would have held in polyethylene technology Dow and Union Carbide were leaders in technology for making gas-phase polyethylene with metallocene catalysts—Dow in concert with BP, and Union Carbide in the Univation venture with ExxonMobil. Ed F. Gambrell, the Dow vice president who handled the technology negotiations, says FTC staffers told him those aspects of the merger made it the most complex they had ever dealt with. "It took F T C a long time to understand the fundamentals of technology licensing, and I don't mean that as a criticism," he says. However, Gambrell and Parker both claim to be satisfied with the solution that was hammered out. It requires Dow to sell to BP patents and assets related to gasphase metallocene polyethylene. In addition, Union Carbide will contribute its Unipol technology for making conventional gas-
AT LAST Carbide CEO William H. Joyce (left) and Dow's Parker are all smiles as the firms' merger is finalized. phase polyethylene to Univation, which is now owned equally by Dow and ExxonMobil. Gambrell says that he's optimistic the integration will go smoothly based on his experience as a member of a team that was set up in September 1999. 'After two or three meetings we didn't even know who was from what side," he says. -MICHAEL MCCOY REASSURANCE
Easing Employee Anxiety
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top priority for Dow executives in the months ahead is allaying the concerns of employees, particularly those at Union Carbide. This is understandable, given that Michael D. Parker, Dow's president and CEO, reiterated at a press conference last week that the combined workforce of the merged company, now about 50,000, will be cut by at least 4% as part of a goal to achieve $500 million or more in annual savings. "During the past 18 months we studied other large mergers," learning what and what not to do, Parker said. "We will treat people with respect and dignity." Everyone in both companies will know where they stand within 180 days, according to J. Pedro Reinhard, Dow's chief financial officer. "We know we need to be dynamic," Reinhard said. Of interest to Carbiders: Although Dow will continue to be headquartered in Midland, Mich., certain Dow businesses, such as surfactants, will be based in Connecticut, where Carbide had its home.-MICHAEL MCCOY
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