27 March 1998 15:05 [Source: ICIS news]
HOUSTON (CNI)--Sun Company agreed Friday to purchase Allied Signal's phenol plant in Philadelphia, Pennsylvania for $185m, Sun officials said.
The $185m purchase price will be paid out over a four-year period in increments that are yet to be determined, according to Bud Davis, spokesman for Sun.
The two companies signed a letter of intent Friday. Completion of the sale awaits negotiation of remaining details and approval by both boards of directors, a process expected to take three to four months.
The phenol facility, located in the Frankford area of Philadelphia, produces 450 000 tonne/year of phenol, 281 000 tonne/year of acetone, and 32 000 tonne/year of alpha-methylstyrene. It is the largest producer of these basic chemicals in North America and one of the two largest in the world.
After the acquisition is completed, Sun will begin construction to expand phenol production by 8%. Davis did not have a cost figure for the expansion.
Charles Valutas, vice president of Sun Chemical, said the phenol plant acquisition is in line with Sun's strategic plan to expand its chemicals business further downstream in the value chain.
Valutas said: "We currently supply approximately half of the plant's feedstock, cumene, from our Philadelphia refinery, and by the third quarter of this year we will complete a project at the refinery that will increase our cumene production there by 70%. This acquisition is an excellent opportunity to move downstream in chemicals by adding a first-class facility right in our own back yard."
Dave Weidman, president of Allied Signal Polymers, said that "This deal makes good business sense for both companies."
Weidman added: "Sun is more willing to expand its merchant business and wants to invest in the facility. Strategically, that helps our phenol cost position. We can also redirect our capital to invest in high-growth areas, such as engineering plastics, speciality films and performance fibres."
Sun, headquartered in Philadelphia, had 1997 revenues of $10.5bn. With its headquarters in Morristown, New Jersey, Allied Signal had sales of $14.5bn last year.
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