Catalyst

Lyondell Chemical is inviting employees to participate in the selection of a name for the company that will emerge following Basell’s pending acquisition of Lyondell.
“What do FedEx, Pepsi and American Express have in common? All three are organizations with well-respected, international brands that are instantly recognized,” a Lyondell memo to employees stated earlier this week. “And all three are similar in size or smaller, in terms of annual revenues, than our company is expected to be following the close of the merger of Lyondell and Basell.” Basell and Lyondell combined will have revenues of nearly $35 billion, and the deal is expected to close sometime in the next several months.
“As we join the highest ranks of our industry, just behind BASF and Dow, we are presented with a choice: keep our existing company names (or some version thereof) or select a new name – one that helps to unify our organizations and focuses more on our future aspirations than the legacies of our pasts.”
Lyondell lays out some ground rules for employees to follow:
1) The name should not include the word “chemical.”
2) The name should work from a global perspective, i.e., it must be acceptable in multiple languages and cultures.
3) The name should be “scalable.” In other words, it should be able to encompass not only the current Lyondell and Basell businesses, but also the future organization as it continues to grow and possibly acquires additional products and businesses.
4) The name should be sufficiently unique to pass the requisite trademark and domain name checks.
Lyondell is looking for names to be submitted 5 p.m. CT on Friday, Sept. 21. Any suggestions out there?

The Society of Chemical Industry (American Section) awarded the Perkin Medal, the highest honor in American industrial chemistry, to biochemist and Genentech co-founder Herbert Boyer at a reception in Philadelphia last week. Boyer was honored for his work on recombinant DNA.
In accepting the award, Boyer reflected on innovation, the importance of science and technology education, and the progress brought about by efforts across many scientific disciplines to advance work on DNA. “It is not just biology, not just chemistry, but other disciplines that also have made this work possible,” Boyer says. “We would not be where we are today without the use of computers in understanding human life and DNA.”
Boyer, along with geneticist Stanley Cohen of Stanford University, first demonstrated the usefulness of recombinant DNA technology to produce medicines. That work provided the foundation for Genentech, which effectively launched the biotech industry that continues to transform the pharmaceutical and chemical sector.
“Everyday in DuPont’s labs researchers make use of science and techniques pioneered by Boyer,” DuPont executive v.p. and chief innovation officer Thomas Connelly said in introducing Boyer. Early results of DuPont’s efforts in this area include bio-based 1,3-propanediol, a material that DuPont developed in partnership with Genencor, which was originally formed as a jv between Genentech and Corning. “We do not pursue proteins for human health, but rather proteins that catalyze a broad range of chemicals using the unique and elegant chemistry of living organisms as a reactor,” Connelly says.
Advancements in life expectancy rates and quality of life have been driven because of the value society has placed on science, technology, and innovation, Boyer says. “This progress has happened, I think, because of the recognition by our society of the benefit of investing in science and technology,” he says. After World War II, government funding of science and technology education programs spurred extraordinary work by scientists and researchers including Boyer. Investment in science and technology has been “very fruitful,” Boyer says. “The increase in knowledge and technology is so impressive and occurs at such a rapid rate that innovation will go on as long as we don’t find some way to stifle it.”

Companies involved in three pending $10-billion-plus industry acquisitions in the U.S. each indicated last week that financing for the deals remains in place, despite the much tougher credit conditions that have emerged since the deals were announced.
Sabic, which is paying $11 billion to acquire GE Plastics, scaled back the size of a planned bond offering by nearly 50% last week, in one sign of the change in credit conditions. Sabic had planned two separate eight-year bond offerings of $1.95 billion and €590 million ($800 million), but now will pursue a single $1.5-billion bond offering, according to Moody’s (London). The yields on the bond could exceed 10%, according to published reports, a sign that borrowing costs have moved sharply higher in recent weeks. Sabic will increase borrowings under senior secured credit facilities, typically loans from banks or other institutions, to $7.7 billion, from $6.4 billion, to close the financing gap. Sabic is expected to close the purchase of GE Plastics by late September.
Basell, meanwhile, said last week that it will borrow up to $21 billion to finance its acquisition of Lyondell. Basell obtained debt financing commitments as of July 16 from Citigroup, Goldman Sachs, and Merrill Lynch, and as of August 8 from ABN Amro, according to regulatory filings. The lenders have agreed to provide $14 billion in senior secured credit facilities. Basell will seek to raise the remaining $7 billion from the sale of high-yield bonds or secondary senior secured credit facilities. Lyondell is also apparently monitoring credit markets. “Basell has substantial assets, and, if the financing were not obtained and the merger did not occur, Lyondell would have recourse against Basell,” Lyondell said in regulatory filings last week.
Hexion, which is set to acquire Huntsman for $10.6 billion including debt, restated in quarterly regulatory filings last week that the deal is fully financed and set to close in first-quarter 2008, pending regulatory review. Hexion is number one globally in epoxies, and Huntsman is number three. Hexion, which is owned by private equity firm Apollo Management, may actually benefit from a prolonged antitrust review and it may be happy to extend the close until early next year. “It will be very, very difficult for private equity to issue high-yield bonds before year-end,” says one investment banker.

Chemical makers delivered first-quarter earnings that were in line with expectations, with a few exceptions, as robust growth in Asia and Europe offset U.S. housing and automotive weakness
(p. 7). Results strengthened, however, as the first quarter progressed and executives presented upbeat outlooks in discussions with investors.
“We continue to expect global GDP growth to be healthy in 2007, above 3%, but with North America slower this year than last year, principally the consequence of weakness in residential construction and the auto industry, and some weakening consumer spending,” Dow Chemical executive v.p. and CFO Geoffery E. Merszei said last week. “Europe should be strong, particularly in the emerging countries of Eastern Europe. Japan should continue to see steady growth, and growth in China is expected to once again be very strong,” Merszei says. Supply/demand balances should remain healthy, notably in the ethylene chain, although capacity start-ups in chlor-alkali will begin to impact those margins later in the year, Dow says. “Strong demand and good pricing momentum have continued through April, reinforcing our view that 2007 will be another solid year for the company,” Merszei adds.
DuPont said last week it was expecting “modest volume gains as growth outside the U.S. and strong agricultural seed markets outweigh lower demand from the U.S. housing and automotive markets.” Overall, energy and raw material costs in 2007 will continue to be about equal to 2006, it adds.
It appears that ethylene/polyethylene profitability turned the corner in March prompting bullish outlooks from petrochemical makers. “Fundamentals for ethylene and propylene oxide are as strong as they have been over the past couple of years, particularly for ethylene,” Lyondell president and CEO Dan Smith said last week. Weak first-quarter petchem margins resulted from a transition between falling fourth-quarter 2006 prices and the price recovery now under way. “Margins seemed destined to continue to be volatile, but in a good zone,” Smith says.
Inventory build-ups at the end of the fourth quarter hurt early 2007 results, but volumes and margins rebounded late in the quarter, says Nova Chemical president and CEO Jeff Lipton. “March was spectacular compared to January and February. We had a March that would be equivalent to the kind of numbers that we saw in the strong months last summer. Very strong Ebitda generation, and very strong sales.”
Overall trends are still strong despite U.S. weakness, an indication that, in this case at least, future industry results should not differ materially from what is forecast.

Sensient Technologies singled out buy-side equity analyst John McMillin–who covers materials, food, and agribusiness for Prudential Equity—saying in a press release issued this morning that an incorrect statement related to historical calculations of Sensient’s stock price was “an attempt to minimize the company’s recent success.”

“McMillin…. incorrectly stated that Sensient’s common stock reached a price of $30 per share in April 1997. In fact, when properly adjusted for splits, the Company’s stock price during April 1997 never exceeded $17.69. Furthermore, at no time prior to April 20, 2007 has the price of Sensient’s stock, when properly adjusted for splits, ever exceeded $27.75 until this past Friday, when the stock reached an intra-day high of $30.34.
Sensient believes Mr. McMillin made the incorrect statement about Sensient’s stock price in an attempt to minimize the Company’s recent success.”

That old saying about never picking a fight with people who buy ink by the barrel comes to mind, but with a slight twist for the digital era. Never pick a fight with someone who can blast out .pdf’s by the dozens in a matter of seconds.

Prudential responded within a couple of hours, acknowledging the error but also taking the opportunity to again re-emphasize a few points.
The Prudential report headline sums it all up: “We apologize for our mistake, but it was not done intentionally—bottom line the stock has done nothing for 9 years and we stated 10 years.”
“In our 20 plus years following food stocks, we have made a mistake or two in our numbers calculations, but never have we seen a company issue a press release on it,” McMillin said in a note to Prudential clients.

“Using Yahoo finance and failing to look at the last number, which adjusts for stock splits, we stated that Sensient (SXT) hit $30 in April 1997, which was wrong. We are sorry for the mistake, but strongly deny the company’s claim in a press release that it was done intentionally.
Correct numbers are that SXT is up 67.8% over the last 10 years versus the market’s 93.7% gain. We have written on SXT since December 1999 and wish the company had at least called us before issuing its press release. A year earlier on December 31, 1998 the stock hit $27.43. What we remember more than everything is the stock doing nothing since we began studying it, which was about a year before we started writing on the stock. Bottom line, SXT has not really moved in 9 years and while our report on Friday suggested 10 years.”