Eastman's good showing interests Dow

13 May 1996 00:00  [Source: ACN]

EASTMAN Chemical has performed strongly since it was demerged from Eastman Kodak two years ago. Turnover has doubled, Eastman Chemical chairman and chief executive officer Earnest Deavenport says. Its stocks, in the low US$40s at the time of the split, have been as high as US$75 since.

Its success together with its relatively small size has made it a prime target for takeover speculation, if not actual takeover intentions.

Rumours are widespread that it has caught the attention of Dow Chemical, which has made no secret of its ambition to build a position in PET polymer markets following its acquisition of an 80% stake in Inca, Italy, and entrance into Argentinian PET markets through its extensive joint venture with YPF.

Deavenport declines to comment on rumours regarding Dow Chemical. Dow Chemical's president and chief executive officer Bill Stavropoulos similarly declined comment at the recent NPRA conference in San Antonio, Texas.

However, informed observers have little doubt talks are being carried out at some level: rumours range from an acquisition by Dow of the Eastman PET business to its acquisition of the whole of Eastman Chemical.

Deavenport does acknowledge that Eastman could be susceptible to unsolicited attentions. 'The smaller you are, the more vulnerable you are,' he told ACN.

'A takeover bid is always possible. The question is, how probable is it? We have a lot of things that are attractive in our portfolio, but we would cost a big premium over our US$5bn sales,' he says. 'It narrows the field, but there are still those capable of this.'

Strategically, Deavenport believes the best means at Eastman's disposal to ensure maximum shareholder return if a takeover attempt cannot be deflected is to keep its stock at its full value. 'We believe it is best for our shareholders if we follow our strategy for the company and not someone else's,' he says. 'So we work to keep the stock price fully valued. Then, if another company attempts to take us over, they will have to pay the full price.'

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