Analysis: Former Harris Chem executive plots growth for PQ

08 April 2005 16:59  [Source: ICIS news]

NEW YORK (CNI)--After 173 years as a family-run company, silica-based inorganic chemicals and engineered glass company PQ Corporation is poised to thrive under new leadership.


Bought by private equity firm JPMorgan Partners in February 2005, the company is now being led by new chairman and CEO Michael Boyce, the former president and chief operating officer of Harris Chemical.


"We are very excited about the opportunity to improve on this well-respected company, and will continue our focus on customers," said Boyce in an interview. "Over the next several months, we will be looking at exactly how we want to operate from a corporate headquarters and plant perspective."


JPMorgan Partners acquired PQ in the low $700m range, or roughly 7 times trailing 12-month earnings before interest, taxes, depreciation and amortization (EBIDTA), according to a reliable source. In February, PQ issued $275m in 7.5% bonds.


The company’s headquarters in Valley Forge, Pennsylvania and its 57 plants across 19 countries are being evaluated for cost and efficiency. "We will look at every opportunity that exists to rationalize plants, and improve costs and efficiencies," said Boyce. "This may include expanding certain plants and shutting down others."


Boyce plans to make headcount reductions by the end of the year, as well as implement a continuous improvement program that will yield lower costs year after year. The company is conducting a review of operations, which will last several months.


PQ has 1,900 employees and sales of almost $600m. The company traces its roots back to a family soap and candle business founded by Joseph Elkington in 1831. Philadelphia Quartz Company started producing sodium silicate 30 years later in 1861 to replace rosin in soap formulations.


Boyce brings a sharp business and entrepreneurial focus to the storied company, having helped form Harris Chemical Group in 1990 through the buyout of three salt and inorganic chemical companies. Harris Chemical had sales of $1bn and produced salt, soda ash, boron chemicals, and other inorganic chemicals including potash crop nutrients when it was sold to IMC Global in 1998 for $1.4bn ($450m in cash and the assumption of $950m in debt).


Boyce also serves as chairman and chief executive of Peak Investments, as well as its companies Peak Lime, Peak Sulfur, Peak Chemical and Southern Aero.


"We’re obviously going to go through a culture change, operating in a more entrepreneurial world than existed previously," Boyce said. "PQ actually functioned as a public company and will continue to do so from a financial perspective. But we want to bring an attitude of people having a stake in how well the company does. That’s the kind of culture and attitude we want to create here - a culture of owners."


While Harris Chemical went through major technological changes, carrying a great deal of risk, PQ as a stable business requires much less upheaval.


"At Harris we took huge risks from a technical standpoint. At PQ, we don’t have to do that," maintained Boyce. "We’re very happy about the level of risk taking needed versus what we had to do at Harris. If you look at the stability of PQ, it’s a bit like the salt business, but even more stable because we don’t have the seasonality."


PQ will continue to make selective bolt-on acquisitions as part of its growth strategy. Past acquisitions include Clariant’s European silicates business (2002), Kemira’s silicates business (2002), and Akzo-PQ Silica (2001), the company’s former joint venture with Akzo Nobel.


PQ plans to retain its engineered glass business Potters Industries. The unit makes engineered glass materials for the highway safety, polymer additive, metal finishing and conductive particle markets. A major portion of the company’s glass bead production is used for light-reflective highway lane markings.


"Clearly the synergies between the chemicals and glass businesses are not overriding, but there are some, and I am very comfortable having businesses like Potters under the same umbrella as chemicals," said Boyce. "Regardless of the synergies, we like the business given its growth prospects and plan on keeping it."


Looking ahead, an initial public offering (IPO) could be an exit option for JPMorgan Partners. Today’s IPO market is very favourable for chemicals, recent successful offerings having been made by Huntsman, Celanese, Nalco and Westlake.


"One option for a business like PQ that is very stable and predictable from a cash flow standpoint, would be an IPO," Boyce noted. "Over the next several years we will be focused on improving earnings. Then we will start exploring what options are out there. If the markets remain favourable, certainly an IPO makes a whole lot of sense."


(For additional Chemical Market Reporter anaylsis, visit the CMR web site at

By: Joseph Chang
+1 713 525 2653

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