30 March 1998 00:00 [Source: ICB Americas]In an effort to integrate downstream, Sun Company Inc. has signed a letter of intent with AlliedSignal to acquire AlliedSignal's Philadelphia, Pa., phenol plant and the facility's customer base by mid-year. The plant makes 1 billion pounds of phenol, 620 million pounds of acetone and 70 million pounds of alpha-methyl styrene each year.
Sun says it has not shelved Allied's previously announced plan to boost phenol capacity by about 8 percent. The plant will also continue to feed Allied's downstream nylon business. The deal is subject to negotiations for a definitive agreement encompassing due diligence, regulatory and board approvals.
"We currently supply approximately half of the plant's feedstock, cumene, from our Philadelphia refinery, which is located just 10 miles away in South Philadelphia," says Charles Valutas, Sun Chemical's vice-president.
"By the third quarter of this year, we will complete a project at the refinery that will increase our cumene production there by 70 percent. This acquisition is an excellent opportunity to move downstream in chemicals by adding a first-class facility right in our own backyard."
Dave Weidman, president of AlliedSignal polymers, says the deal strengthens both companies. "Sun is more willing to expand its merchant business and wants to invest in the facility," Mr. Weidman explains.
"Strategically, that helps our phenol cost position. We also want to redirect our capital to invest in high-growth areas where we add significant value, such as engineering plastics, specialty films and performance fibers," he says.
According to SRI Consulting, AlliedSignal had a 21 percent share of US phenol market, though the Philadelphia facility was the company's only phenol plant.
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