Europeans take over more U.S. pigments The shakeout in the U.S. pigments industry continues with the third major divestment of the past two years. Like the two others before it, the current move would transfer a formerly U.S.-owned operation to European hands. The upshot is that U.S. organic pigments in particular are fast joining U.S. dyes as a largely European preserve in the $2.5 billion overall U.S. color chemicals business. Last week, Hercules said that it had reached an agreement in principle to sell the worldwide pigments business of the parent company plus European pigments subsidiaries to Ciba-Geigy Corp., the New York City-based arm of Ciba-Geigy Ltd. of Basel, Switzerland. Financial terms were not disclosed. Hercules says pigment sales of the operations to be divested were more than $100 million in 1977. Hercules plants involved are located at Glens Falls, N.Y.; Washington, Pa.; Richmond, Calif.; Maastricht, the Netherlands; and Houthalen, Belgium. Products are both organic and inorganic but weighted toward inorganic. Hercules expects final agreements on the transaction by the end of 1978. Agreements on operations in the Netherlands and Belgium will be subject to confirmation by these subsidiaries and may involve transfer of these operations to the parent Ciba-Geigy or its European affiliates. Ciba-Geigy expects to operate the pigments business as it has been in the past. Although the pigments sales concerned are sizable, they do not affect total sales volume of either company very much. Hercules would lose about 6% of its total sales, which were $1.7 billion in 1977. Ciba-Geigy Ltd. would add about 2% to its worldwide sales, which were more than $5 billion in 1977. The Hercules agreement follows two other major sales of U.S. pigments operations to European owners since the beginning of 1977. In June, Allegheny Ludlum Industries agreed in principle to sell the former pigments division of Chemetron to Rhinechem Corp., the U.S. subsidiary of Bayer A.G. in West Germany. In January 1977, Allied Chemical sold its organic pigments unit to Harmon Colors Corp., also a subsidiary of Rhinechem. Three other recent U.S. divestments in the dye business have involved U.S. companies on both ends in two and a new European owner in the third. Earlier this month, Har-
shaw Chemical subsidiary of Gulf Oil sold its dye business to Crompton & Knowles. In June 1977, Allied Chemical sold the last of its color chemicals business, a dye plant in Buffalo, to recently formed Buffalo Color Corp. In the international transaction, GAF in March 1978 sold its Rensselaer, N.Y., dye plant to BASF Wyandotte, part of West Germany's BASF. BASF's new U.S. dye plant enlarges the lion's-share position of West European firms in the U.S. dye business, estimated at $690 million in 1977 by Charles H. Kline consultants of Fairfield, N.J. The three pigments takeovers by European firms give European interests a major share of the U.S. organic pigments business, which Kline puts at $445 million in 1977. The remaining part of the $2.5 billion total U.S. color chemicals industry, inorganic pigments, worth about $1.35 billion in 1977, is still dominated by U.S. companies. However, European-controlled companies such as Mobay are sinking large sums into these U.S. plants, too (C&EN, March 28,1977, page 8). •
Occidental offers $1 billion for Mead Occidental Petroleum, which has grown fast before, intends another instant 30% sales jump to an annual rate of at least $8 billion through acquisition. The ticket would be Mead Corp., the paper and other forest products-based company of Dayton, Ohio, which had sales of $1.8 billion in 1977. With such a move into the realm of renewable resources (trees), Occidental would relegate its chemical sales to about 19% of the total, down from 24% in 1977 and a peak of 31% through much of the late 1960's and early 1970's. The offer from Occidental, which is valued at about $1 billion, has been termed one of the biggest merger offers in history. But it has met with a less than enthusiastic reception from Mead's chairman of the board and chief executive officer, James W. McSwiney. McSwiney says that, although the offer was being studied, in his opinion it is not in the best interests of Mead's shareholders. The Mead board of directors has a job just in unraveling the implications of the complex offer by Los Angelesbased Occidental. Under the terms of Occidental's proposal, Mead shareholders would receive, in a tax-free exchange, 0.28 share of Occidental preferred stock carrying a cumulative dividend of $10 per share and 0.07 share of Occidental convertible pref-
Long-term profitability: Mead up, Occidental down Profits as % of sales8
Occidental
a Profits before extraordinaries. Note: Occidental Petroleum had a net loss in 1971.
erence stock carrying a cumulative dividend of $7.50 per share for each share of Mead common stock held. The $7.50 convertible preference shares would be convertible into Occidental common shares at a premium of about 20% over their market value during an agreed period before the effective date of the merger. They would rank junior to the $10 preferred shares and to Occidental's presently outstanding preferred shares. Occidental says that it would expect all outstanding Mead preferred shares to be called for redemption. However, holders of Mead convertible preferred shares would be entitled to convert their shares to Mead common shares and thus receive the Occidental preferred and convertible preference shares. According to Occidental, the offer would involve issuing up to about 8 million shares of $10 Occidental preferred shares and up to 2 million of the $7.50 convertible preference shares. Huge as Occidental's offer is, it may not be enough for Mead. Occidental may have to come up with something to sweeten the pot and left that door open when it made the offer. In its letter transmitting the offer to Mead, Occidental said, "Although we believe our offer is entirely fair, we would carefully consider the views of your board and its advisers and would welcome another meeting with you as soon as you are in a position to respond to our offer. We have made our proposal in the hope that we can arrive promptly at a mutually satisfactory agreement for the combination of our two companies on the general terms we propose." However, the letter also contained Aug. 21, 1978 C&EN
7
something of a threat. Occidental said that should the two companies not be able to agree on terms, "Occidental will not be bound by the terms outlined in this letter in any other action which we may elect to pursue in the future." This seems to leave the way open for an unfriendly tender offer if Occidental believes that it is called for. Mead had earnings in 1977 of about $98 million on sales of $1.8 billion. Sales for second-quarter 1978 were $590.8 million, up 31% from sales of $452.5 million for second-quarter 1977. Income for second-quarter 1978 was $31.3 million, up 11.8% from $28 million in the like period in 1977. •
Fertilizer Industry faces many challenges The U.S. fertilizer industry is losing market share. Fertilizer trade patterns are changing. Today's customers may be tomorrow's competitors. In short, the U.S. fertilizer community—farmers and dealers as well as producers—can no longer take the rest of the world for granted. That's the message from Tennessee Valley Authority economist Edwin A. Harre. It was delivered last week in St. Louis at the TVA Fertilizer Conference, held in conjunction with the Fertilizer Institute's annual trade fair. In 1967, according to a study made by Harre and associate Hazel A. Handley, the U.S. had 26% of the world's ammonia capacity and 46% of the world's phosphoric acid capacity. Since then, the U.S. share has been shrinking. By 1978, although U.S. ammonia and phosphoric acid capacities had both grown about 70%, world capacities had increased more than 200%. The U.S. share is now 20% for ammonia, 31% for phosphoric acid. And whereas current U.S. expansion programs are virtually com-
U.S. lag in fertilizer capacity will continue U.S. capacity as % of world total 60 1
40 B j j ^ HMk L^^5 20 B S S
j i W^Phosphoric Phosphoric acid acid Ammonia Ammonia
^\^BH«J y
;; ' . 3
o iHlinilillllHll 1967 69 71 73 75
77 79
Source: Tennessee Valley Authority
8
C&EN Aug. 21, 1978
81 83 85
plete, expansions in other countries will, over the next several years, increase world ammonia capacity an additional 35% and phosphoric acid capacity 29%. By 1983, the U.S. share will be only 15% for ammonia, 24% for phosphoric acid. In the past 10 year's, Harre notes, East European countries and the U.S.S.R. have almost tripled ammonia capacity. In the next four years they will increase it another 50%. The fertilizer production capabilities of Asian communist countries have similarly expanded. By 1982, more than half the world's ammonia capacity will be operated by stateowned or -controlled enterprises, compared to about one third in 1967. Publicly owned phosphoric acid capacity has increased 10-fold in 10 years, it now accounts for one third of the world total. Also, a significant amount of the worldwide increase is in developing countries that have been large buyers of U.S. fertilizers. In the next few years, many of these countries will have added enough new capacity to eliminate their needs for fertilizer imports. In fact, Harre points out, some already have capacity beyond their current use level and are actively seeking export markets. Regional trade patterns also have changed markedly in the past 10 years, Harre says. The U.S. is exporting proportionately more fertil-
izer to Europe and South America, proportionately less to Asia. U.S. nitrogen exports are at near-record levels. But the U.S. also imports large tonnages of nitrogen fertilizers; it has been a net importer for three of the past four years. And the U.S.'s two leading customers, Brazil and Mexico, are both embarked on ambitious plant-building programs aimed at reducing their dependency on imports. Mexico already is exporting significant quantities of ammonia to the U.S., Harre notes, and could turn quickly from a net importer to a net exporter. In contrast, U.S. phosphate exports are booming. In the past 15 years, the U.S. export market has grown 16% annually, compared to an annual domestic increase of only 4%. In just the past two years, the U.S. share of world phosphate trade has grown from about a third to more than half. "Is it realistic to expect that we will continue to enjoy this level of export shipments?" Harre asks. He doesn't know. But he warns that the leading markets for U.S. fertilizer exports won't be the same in 1985 as they are today. "If we are to maintain the export tonnage levels that we have today, we must be looking for new market opportunities, rather than expecting them to come to us," he says. "There are too many other potential sources of supply for us to be complacent." •
Process may cut cost of coating solar cells A new process developed at Westinghouse Electric's R&D Center in Pittsburgh could lead to a low-cost method for applying an antireflective coating to silicon solar photovoltaic cells. Westinghouse speculates that the process could lead to a 10- to 20-fold reduction in the cost of coating mass-produced cells. Silicon solar cells need coatings to improve their efficiency. Uncoated, they reflect about 40% of the incident energy. By reducing reflection, the coating can improve efficiency 48%. Existing techniques for coating cells use vacuum sputtering and chemical vapor deposition—costly processes, Westinghouse notes, and not well suited to mass production. The process developed by Westinghouse researcher Bulent E. Yoldas is based, the company says, on a unique method of preparing coating solutions. With the process, cells can be spun or dipped in the solution. After application, the coating is baked for several minutes, leaving a glasslike oxide film on the surface. Yoldas notes that an antireflective coating must be highly transparent,
as well as stable in an outdoor environment. Also, the refractive index and thickness of the coating must meet certain conditions to be antireflective in the desired wave-length range. Minimum reflection from a silicon cell can be achieved, he says, by using an antireflective coating that is a quarter-wave-length thickness, with an index of refraction of about 2.0. With the new process, the index of refraction and thickness of the coating can be controlled precisely by changing the viscosity of the coating solution and varying the drawing or spin rate during coating. Besides lowering the amount of energy needed to make solar cells, the new process reduces waste. But Yoldas stresses that the process's simplicity and inexpensiveness are the most significant aspects. Westinghouse notes that current total costs for producing solar cells are about $11 per watt and that the Department of Energy's goal for 1986 is 50 cents per watt. Existing coating processes cost as much as 20 cents per watt. The new process would cost about 0.5 to 1 cent per watt. •
