November 14, 2006
Lion to Buy Geismar Plant
By GARY PERILLOUX
In a merger of rubber manufacturing sites, Lion Chemical Capital will buy Chemtura's Geismar facility and related products near the end of 2006.
On Nov. 2, Chemtura said it would sell its 400-acre synthetic rubber production site in Ascension Parish but didn't disclose the buyer. Now, the company pegs the private equity firm from Houston as the suitor.
Lion, which owns a 250-employee copolymer site on Scenic Highway, will manage its new Geismar business from the Baton Rouge headquarters but expects few other immediate changes at the 450- employee Chemtura operation.
The business lines are different. Lion Copolymer in Baton Rouge makes styrene butadiene rubber, or SBR, while most of Chemtura's production centers on ethylene propylene diene monomer, or EPDM.
SBR's key demand is in the tire sector while EPDM goes into weather-stripping, hoses and other non-tire auto parts. Lion produces about 360 million pounds of SBR annually, with a small portion going into conveyor belts and industrial products. One of Chemtura's secondary markets is roofing products.
"Both sites really make separate products and will be run as independent businesses," said Paul Saunders, CEO of Lion Copolymer. "We certainly are expecting a good, smooth transition and we're excited about having the new people. We both have high standards of operation. I think we'll have a good company."
The Lion Chemical acquisition continues a pattern of complementary chemical purchases. In 2004, Lion bought Excel Polymers, a rubber compounding business with eight plants in four nations doing about $400 million in business a year.
Though the purchase price hasn't been disclosed, Lion would acquire synthetic rubber lines from Chemtura that generate about $300 million in annual revenue.
Saunders said Chemtura is including some small international compounding sites in the deal as it exits the synthetic rubber business, but the Geismar operations are the heart of the transaction.
"I think the main thing that would be important to the Geismar people is they're going from being a small cog in a major corporation where they're a non-core asset to being a core business for us," Saunders said. "We'll be looking for ways to invest in the business and the people."
Chemtura officials recently signed a letter of understanding to explore synthetic natural gas purchases from Synfuel, a proposed $5 billion coal gasification that would open in about 2010 in Geismar. Chemtura said any agreements between it and Synfuel would transfer to Lion Chemical.
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