By OGJ editors
HOUSTON, Mar. 29 -- Lyondell Chemical Co., Houston, and Millennium Chemicals Inc., Hunt Valley, Md., said Monday they agreed to a stock-swap merger that will create the third-largest independent, publicly traded chemical producer in North America.
The transaction is valued at $2.3 billion, including assumption of $1.3 billion of Millennium's net debt.
The new company will retain Lyondell's name and will be headquartered in Houston. Dan F. Smith will continue as president and chief executive officer, and Dr. William T. Butler will continue as Lyondell's independent chairman. Two independent members of Millennium's current board will be added to Lyondell's board at closing.
Millennium will become a wholly owned subsidiary of Lyondell. The combined company would have pro forma 2003 revenues of more than $11 billion and market capitalization of nearly $4 billion, officials said.
Under a definitive agreement, Millennium shareholders will receive 0.95-1.05 shares of Lyondell common stock for each share of Millennium common stock, depending on the volume-weighted average price for Lyondell shares during a 20-day period. Millennium shareholders will receive 0.95 shares of Lyondell stock if its price averages $20.50/share or greater, and 1.05 shares if the average price is $16.50/share or less. Between those two prices, the exchange ratio would vary proportionately.
The new shares to be issued for the new company will receive the same cash dividend as existing outstanding Lyondell shares. The transaction is subject to customary conditions, including approval by both companies' shareholders, and is expected to close in the third quarter.
Officials said the two companies are well positioned globally and are leaders in propylene oxide and derivatives, titanium dioxide (TiO2) and acetyls markets. Through their Equistar joint venture�a major North American producer of ethylene, propylene, polyethylene, and aromatics�they claim significant leverage to take full advantage of the recovery in the petrochemical cycle. The combined company will operate in 16 countries and employ 10,000 people worldwide.
"We expect this transaction to be accretive to Lyondell's earnings per share in 2005," Smith said. "This is another step in our long-standing strategy to increase Lyondell's global depth and breadth, and maintains our leverage to the ethylene cycle, allowing us to use the resulting cash flow to reduce debt."
He said, "We expect to realize at least $50 million in cost savings from this combination, bringing value to all of the shareholders."
Robert E. Lee, president and CEO of Millennium, said, "We strongly believe that the added diversification and market leadership brought by the TiO2 and acetyls businesses will greatly benefit the combined entity. These businesses also will benefit from being part of a larger global entity."
Millennium is the second-largest producer of TiO2 in the world, in a market in which the five largest producers represent 75 percent of worldwide capacity. Millennium has a larger geographic footprint than any other TiO2 producer, with competitive production facilities on four continents.
The acetyls business is a significant consumer of ethylene consumer and integrates "very well" with Equistar's petrochemical business, officials said. Millennium is No. 2 in North American capacity for acetyls and is No. 3 in the world, utilizing proprietary technology at its world-scale manufacturing facility in La Porte, Tex.
