OMNOVA sees key BD sourcing synergies in Eliokem acquisition

23 September 2010 18:29  [Source: ICIS news]

TORONTO (ICIS)--OMNOVA’s planned acquisition of Eliokem will create a $1bn (€750m)/year sales emulsion polymer and specialty chemicals producer with better access to key raw materials, in particular butadiene (BD), and a strong presence in Asian growth markets, company executives said on Thursday.

OMNOVA CEO Kevin McMullen and other company executives said they expected significant synergies in raw material sourcing as both companies were buying the same raw materials – BD, styrene, acrylonitrile (ACN) as well as various acrylates.

The combination with Eliokem would provide a “clear strategic advantage” in sourcing BD at a time of tight supplies, especially in North America, where the product had often been under allocation in the past five years, they told analysts in a webcast conference call.

The combined company would be able to source BD around the world, wherever there was a cost advantage or greater availability, they said.

In the past 12 months, BD was at times up to 20 cents/pound ($441/tonne) cheaper outside of North America, they added.

France-based Eliokem had very good BD supply contracts in place, enabling the combined OMNOVA/Eliokem entity to optimise international BD inputs in order to achieve the highest margins for its own product worldwide, they said, but did not quantify the expected synergies in terms of dollars.

At the same time, Eliokem would add a range of high-margin niche specialties in latex, rubbers, antioxidants, elastomeric modifiers, oilfield chemicals and coatings to OMNOVA’s portfolio, as well as key production facilities in high-growth China and India, they said.

Also, OMNOVA planned to retool Eliokem’s plants to enable those facilities to make products it had been outsourcing, the executives said.

The retooling would require only a “very modest investment” and could happen within 12-18 months, they said.

Eliokem had sales of about $268m in the 12 months through 31 May. OMNOVA’s sales for the same period were $734m.

Eliokem used to be part of tyre maker Goodyear. It was sold in 2001 to private-equity firm Littlejohn, which sold it to AXA Private Equity in 2006.

($1 = €0.75)

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