Dow Chemical set to swallow Union Carbide
15 Jan 2000
Dow Chemical is to take over Union Carbide, and will retire the name of the company which became synonymous with disasters after the Bhopal incident. The deal will create the world's second largest chemicals producer after DuPont, but is likely to raise monopoly concerns in some technology areas.
The merger takes Dow back into some of the more cyclical commodity areas from which it - and other chemical majors - have tried to escape over the past two years. Union Carbide is one of the two largest polyethylene producers in the world, along with BP Amoco; it also makes polypropylene, ethylene oxide, and ethylene glycol. All of these are commodity products deeply affected by the cyclical swings that plague the chemical industry, although they are backed up by a strong technology licensing business with clients around the world. It also has a wide specialities portfolio, including solvents, intermediates and fine chemicals.
Dow's products spread across the spectrum of petrochemicals, from basic chemicals to elastomers and resins, with a similarly-large specialities and fine chemicals division.
Valued at $9billion, the merger would create a company with a combined annual turnover of over $24billion. Assets of $30billion and operating income of $3billion, and an operational base in 168 countries, are other features of the new firm. The deal will cost jobs, however, with Dow projecting some 2000 redundancies, around 4 per cent of the current workforce.
The company's technology and research portfolios are a major feature of the deal; it combines two of the world's major process technology licensors, and two of the main players in metallocene catalyst research. Such subjects are certain to be considered by US Federal Trade Commission and other monopolies regulators.
`This merger "jump-starts" the growth phase of our strategy,' comments Dow chairman William Stavropoulos. `It immediately adds new performance businesses as platforms for growth while strengthening the ones we already have.'
William Joyce, Union Carbide chairman, adds: `Dow and Union Carbide are companies with similar cultures and dedication to technology, to high productivity and to quality standards. With its leading technologies and outstanding facilities, the new Dow has even stronger long-term prospects for profitable growth and enhancing shareholder value.'
