Catalyst

The New York Times reports this morning that Dow Chemical made a bid to acquire DuPont last fall. The gem is included in a report that discloses that the SEC has launched an inquiry into whether two senior executives at Dow Chemical secretly tried to put the company into play as well as into the unusual trading in its stock that may have resulted.

But the inquiry, still in the informal stage, may also look at a deal that the company actually pursued, the Times reports. Last fall, Dow made an overture to acquire DuPont in a deal worth more than $40 billion, according to people involved in the talks.

DuPont rebuffed the advance and never engaged in negotiations, the Times says. The article notes that Dow CEO Andrew Liveris, sits on the board of Citigroup with Alain J. P. Belda, the CEO of Alcoa, who at the time of the overture was also a director of DuPont. Belda stepped down from DuPont’s board in March.

UPDATE (12:10 p.m.):
Dow has declined comment on the possible SEC investigation, as well as whether it made an approach to DuPont last fall.

DuPont’s statement is below:
“We have seen today’s New York Times article on Dow Chemical and have no comment,” DuPont said. “We are fully focused on our strategic plan, which is showing strong results. DuPont recently completed an 8-year transformation into a science company focused on sustainable growth. More than 25 percent of the company is now in a leading position in high value-added, non-cyclical businesses in bio-sciences, agricultural and industrial biotechnology and biofuels. Our science-based products and services are targeted to global markets including agriculture, transportation, construction and safety and protection.”

Chemical makers are ramping up green chemistry efforts, spurred by many factors, including regulation, a desire for renewable feedstocks and materials, and public demand for greener and more environmentally friendly products. One challenge for producers, however, is that customers demand products that cost the same as traditional materials. This makes it tough for producers to cover the cost of development. “Customers want a green product but say I’m not going to pay a penny extra,” Rohm and Haas v.p. and chief technology officer Gary Calabrese, told attendees at a Société de Chimie Industrielle meeting on innovation held in New York last month. “They will take it if it’s free.” Attitudes may be starting to shift, however, he adds. “Things may be changing, but it is still too early to tell how sustainable that really is,” Calabrese says. For now the green label serves as a “tie breaker.” Customers do lean toward green products all else being equal, but it is not clear that they are willing to pay more just yet.
Proponents of green chemistry argue that financial benefits will become clear as development progresses. “Companies realize that now the issues of environment and human health can add to innovation, profitability, and competitiveness rather than being a cost drain,” Paul Anastas, a green chemistry pioneer, and director at Yale University’s Center for Green Chemistry and Green Engineering tells CW in our cover story this week. Regulations have in the past driven companies to develop environmentally friendly products, but the driver is now changing, he says. “Green chemistry is trying to go far beyond, through innovation, to make these regulations less relevant.”

Sabic is very near a deal to acquire GE Plastics, sources tell CW. A formal announcement is expected by Monday, May 21. Bidding for the business was near $11 billion, according to financial sources. Other finalists in the bidding for GE Plastics included private equity firm Apollo Management (New York) and Basell. GE said last month that it expects to announce a definitive agreement on the sale of plastics in the second quarter, and hopes to close the transaction in the third quarter.

The American Section of the Société de Chimie Industrielle awarded its Palladium Medal last week to Nova Chemicals president and CEO Jeff Lipton, a deserving honor for one of industry’s most passionate, tireless, and effective advocates. During his acceptance speech, Lipton called on industry to focus more attention on the critical issue of process safety, urging companies to measure and publicly report uncontrolled process fires as well as loss of process containment incidents.
Citing the catastrophic explosion at BP’s Texas City, TX refinery two years ago, Lipton said: “I would bet that there isn’t a management team, CEO, or board of directors of a refining or chemical company that hasn’t studied the reports and then said, in one way or another, ‘That, but for the grace of God, could have been our facility or our employees.’”
Lipton also recounted experiences at Nova. Soon after joining the company from DuPont in 1993, he visited each site and “came away quite shaken from one.” The plant, using a process that involves a flammable solvent under high temperature and pressure conditions, had suffered process fires every few weeks. “In my mind the leaders of that plant had been lucky-—very lucky—that they hadn’t yet had a time when they had a fire, and the conditions in and around the plant had, because of some other accident or mistake, become susceptible to an explosion.” Lipton took action, measuring each incident across the company and tying incentive compensation to improvement.
One “leading indicator” for fire safety was “loss of process containment. It became pretty obvious—if we keep all materials from leaking out of pipes, pumps, valves, process vessels, and storage tanks—there will be no uncontrolled process fires even in the most dangerous operation,” Lipton says. “That plant that had a fire every few weeks for many years, last had one in 2003,” he says. “Process safety improvement will reduce the number of catastrophic explosions, reduce environmental risk, and also make our operations more energy efficient. Not a bad result for paying attention to one new set of data.”
Quick action on the issue would befit Lipton’s legacy as one of industry’s leading statesmen. “I will feel fully deserving of the International Palladium Medal when we are successful in getting the ACC, and then related associations around the world, to begin to require members, as part of our tremendously successful Responsible Care program, to measure and publicly report loss of process containment and uncontrolled process fires.”

Russian industrialist Leonard Blavatnik, who controls Access Industries, the owner of Basell, has purchased the right to acquire an 8.3% stake in Lyondell Chemical. Blavatnik signed a forward contract with Merrill Lynch that grants him the option of purchasing about 21 million Lyondell shares at $32.11/share, or $674 million. Merrill Lynch has hedged its exposure by agreeing to acquire Occidental Petroleum’s 8.3% stake in Lyondell, in a deal that closed on May 9. Blavatnik says that he “may seek to engage in discussions with [Lyondell] concerning, among other possible scenarios, the merits of an offer to acquire all of [Lyondell] and the merits of a merger, combination or similar transaction between the [Lyondell] and affiliates… , including Access Industries or Basell.” Access Industries had not had formal discussions on this investment with Lyondell prior to the agreements, according to sources close to Access Industries. Blavatnik is expected to attempt to call Lyondell CEO Dan Smith later today, according to those sources. Access is also a leading candidates to acquire GE Plastics, financial sources tell CW. Could Blavatnik be assembling an integrated chemicals giant? Lyondell would provide Basell’s operations with propylene and ethylene, and GE Plastics with benzene and styrene.