LYONDELL AND MILLENNIUM COMBINE OLEFINS AND POLYMERS BUSINESSES
TO CREATE NEW $5 BILLION CHEMICAL COMPANY
Jointly-Owned Venture Expected to Improve Annual Profitability by $150 Million
and Reduce Effects of Industry Cyclicality on its Parent Companies
Houston, TX, Iselin, NJ and London, England--July 28, 1997--Lyondell
Petrochemical Company (NYSE:LYO)and Millennium Chemicals Inc. (NYSE:MCH) have
signed a definitive agreement to form a new venture, with expected revenues of
approximately $5 billion, comprised primarily of the olefins and polymers
businesses of the two companies.
The new company is expected to be the largest producer of ethylene and
polyethylene in North America. It will consist of 13 manufacturing facilities on
the U.S. Gulf Coast and in the U.S. Midwest, producing ethylene, propylene,
polyethylene, polypropylene, ethyl alcohol and associated products. The
combination will create a strong financial entity with book assets of
approximately $5 billion. it plans to have $1.745 billion of debt, witha note
receivable from Lyondell of $345 million, and substantial free cash flow.
The new venture company, which will be operated as a partnership, will be
owned 57% by Lyondell and 43% by Millennium. The venture's governance structure
will include a six-person committee, co-chaired by Dan F. Smith, President and
Chief Executive Officer of Lyondell, and William M. Landuyt, Chairman and Chief
Executive Officer of Millennium. Smith also will serve as Chief Executive
Officer of the venture company, which will be headquaretered in Houston, Texas.
The Venture Creates Value Through Cost Reductions, Operating Efficiency
Improvements and Broader Product Mix
"We will create a new world class chemical company with enhanced asset
utilization and a leading cost position across a broad line of products by
blending assets, employees and operating capabilities from Millennium and
Lyondell," said Dan F. Smith. "The extraordinary fit of these businesses will
provide higher earnings power and create unique value that we expect will be
differential in the industry."
"The venture will have one of the broadest product lines in the industry,
with extensive product development and research capabilities and the best
employees from each organization, enabling it to better serve customers in
rapidly growing markets," said William M. Landuyt.
The partnership is expected to generate more than $150 million in annual
pre-tax profit improvement. Substantial savings are expected to be realized
early, with the full $150 million annual savings achieved by the end of 1999.
Cost improvements will be achieved in such areas as eliminating duplicate
overhead and staffing, improved purchasing capabilities, and better utilization
of existing logistics and distribution channels.
Efficiency improvements will include such items as greater use of feedstock
flexibility, expanding the upgrade of co-products internally, sharing best
business practices, and optimizing production scheduling of polymer plants.
Customers will benefit from the greater supply flexibility gained through
multiple olefins production sites and polymers customers will have access to
significantly broader resin product lines.
"This transaction is a major step in the execution of Lyondell's strategy
to reduce cyclicality and grow the petrochemicals business through greater
integration and a broader downstream product mix. It also advances our low cost
strategy by compounding the benefits of recent cost reduction efforts and
building a base for future improvements. Increased cash flow generated by this
venture, as well as our interest in LYONDELL-CITGO Refining Company, will
provide Lyondell with a greater number of cash allocation options to create
shareholder value than ever before in our history," said Smith.
Landuyt said, "This combination helps fulfill Millennium's strategy to
maximize value creationin our polyethylene and related businesses by driving
down costs and by partnering with an organization that shares our relentless
focus on optimizing synergistic opportunities. The transaction also enhances
Millennium's financial flexibility to pursue expansion of our specialties and
intermediates businesses thereby reducing the volatility of Millennium's overall
business portfolio."
Closing Expected this Year
The transaction, which has been unanimously approved by the Boards of
Directors of both companies, is expected to close by year end, following
approval by both companies' stockholders and satisfaction of certain other
conditions.
The Venture Will Be Comprised of Quality People, Assets & Operating Capabilities
Lyondell's contribution to the new venture company includes the businesses
associated with the following operations:
The olefins business, comprised of two olefins plants at the Channelview
Petrochemical Complex near Houston, TX, with annual capacities of 3.8 billion
pounds of ethylene and 2.2 billion pounds of propylene, and related facilities
for the manufacture and production of butadiene, aromatics and other
co-products, as well as storage facilities at Mont Belview, TX.
The polymers business, consisting of three manufacturing facilities located
in Pasadena, Victoria and Matagorda County, TX, with annual capacities of 2
billion pounds of polymer resins.
The technology group and certain business functions located in and near
Houston.
The venture will assume primary responsibility for $745 million of existing
Lyondell company debt; Lyondell also will remain liable on this debt. In
addition, Lyondell will provide a $345 million note payable to the venture.
Not included in the venture are Lyondell's 58% interest in Lyondell-CITGO
Refining, Ltd. (LCR) and its 75% interest in Lyondell Methanol (a joint venture
with MCN Investment Corp.).
Millennium's contribution to the new venture company includes the
businesses associated with the following operations:
The olefins business comprised of olefins plants at Clinton, IA, LaPorte,
TX, and Morris, IL, with a total capacity of 3.8 billion pounds of ethylene.
The polymers business comprised of 4.8 billion pounds of polymers capacity
comprised of five manufacturing facilities in Clinton, IA; Morris, IL; LaPorte,
Port Arthur and Chocolate Bayou, TX.
The performance polymers business with manufacturing facilities in Tuscola,
IL; Fairport Harbor and Heath, OH; and Crockett, TX. The synthetic ethanol and
ethyl ether businesses with facilities at Tuscola, IL; Newark, NJ; and Anaheim,
CA.
Research and technology groups and a research center in Cincinnati, OH.
See list of plants and capacities in Attachment I.
Millennium will receive $1 billion from the exchange: The partnership will
assume $750 million of Millennium's inter-copany debt, which will be repaid from
the proceeds of new bank debt to be arranged by the partnership. In addition,
Millennium will retain $250 million of accounts receivable form the contributed
business.
Not included in the venture are Millennium's interest in acetic acid, vinyl
acetate and methanol assets and operations. Also excluded from the transaction
are Millennium Inorganic Chemicals, Millennium Specialty Chemicals, and
Millennium's equity interest in Suburban Propane Partners.
Executive Management Team Announced for New Venture
The venture company will be governed by an owners' committee comprised of
representatives of Millennium and Lyondell. Members of the owners' committee
will include:
Dan F. Smith, President and CEO of Lyondell Petrochemical Company and CEO of the
venture - Co-Chairman
William M. Landuyt, Chairman and CEO of Millennium Chemicals Inc.- Co-Chairman
Dr. Ronald H. Yocum, President and CEO of Millennium Petrochemicals Inc. -
Member
John E. Lushefski, Senior Vice President and CFO of Millennium Chemicals Inc. -
Member
Jeffrey R. Pendergraft, Senior Vice President, Chief Administrative Officer of
Lyondell Petrochemical Company - Member
Clifton B. Currin, Jr., Vice President, Corporate Development of Lyondell
Petrochemical Company - Member
The members of the executive management team of the venture company
include:
Eugene R. Allspach, President and Chief Operating Officer
Joseph M. Putz, Senior Vice President, Finance and Administration
Debra L. Starnes, Senior Vice President, Polyolefins
John R. Beard, Vice President, Manufacturing
J. R. Fontenot, Vice President, Engineering
Alan Houlton, Vice President, Customer Services
Gerald A. O'Brien, Vice President, Secretary
Myra J. Perkinson, Vice President, Human Resources
W. Norman Phillips, Jr., Vice President, Olefins
Kerry F. Williams, Vice President, Research and Development
Jeffrey L. Hemmer, Director, Business Process Improvement
Lyondell Petrochemical Company (web site: www.lyondell.com) is a major
commodity petrochemical and polymers company with headquarters in Houston, TX.
The company manufactures and markets olefins (primarily ethylene, propylene,
butadiene, butylenes and specialty products), aromatics, methanol and MTBE, and
polymers (or polyolefins), including high-density polyethylene, polypropylene
and low-density polyethylene. Lyondell is involved in petroleum refining through
its 58% participation interest in LYONDELL-CITGO Refining Company Ltd (LCR),
which produces refined petroleum products, including gasoline, low sulfur diesel
and jet fuel. Lyondell operates a methanol business, in which it has a 75%
ownership interest.
Millennium Chemicals Inc. (web site: www.millenniumchem.com) is a major
international chemical company, with leading market positions in a broad range
of commodity, industrial, performance and specialty chemicals. Millennium
Chemicals was formed as a result of a spin-off from Hanson PLC, a UK public
company, on October 1, 1996.
Millennium Chemicals Inc. is
the largest producer of polyethylene products in the United States;
the second largest producer of titanium dioxide (TiO2 ) in the United
States and the third-largest in the world; the second largest producer of
acetic acid and vinyl acetate monomer in the United States; a leading
producer of high value-added performance polymers, color concentrates and
polymeric powders and other products, including titanium tetrachloride,
cadmium/selenium pigments and silica gel;
and a leading producer of fragrance and flavor chemicals.
The statements in this release relating to matters that are not historical facts
are forward-looking statements that involve risks and uncertainties, including,
but not limited to, future global economic conditions, production capacity,
competitive products and prices and other risks and uncertainties detailed in
the companies' Securities and Exchange Commission filings.
For inquiries, please call:
Lyondell Millennium Chemicals
Media: Jackie Wilson (713) 652-4596 or Investors and Media:
David Harpole (713) 652-4125 Mickey Foster (732) 603-6777
Investors: Kevin DeNicola (713) 652-4590
MANUFACTURING OPERATIONS OF THE VENTURE
Location Principal products Annual capacity
Channelview, Texas Ethylene 3.8 billion pounds
Propylene 2.2 billion pounds
Butadiene 615 million pounds
Benzene 90 million gallons
Toluene 40 million gallons
Dicyclopentadiene (DCPD) 80 million pounds
Isoprene 108 million pounds
Resin oil 120 million pounds
Piperylenes 100 million pounds
Alkylate 22,000 barrels per day
MTBE 13,000 barrels per day
Chocolate Bayou, Texas High -density polyethylene 400 million pounds
Crockett, Texas Wire & cable compounds, color 120 million pounds
and additive concentrates
LaPorte, Texas Ethylene 1.74 billion pounds
Low-density polyethylene 395 million pounds
Linear-low density polyethylene 480 million pounds
High-density polyethylene 545 million pounds
Matagorda County, Texas High-density polyethylene 1,050 million pounds
Pasadena, Texas (Bayport plant) Polypropylene 400 million pounds
Low-density polyethylene 140 million pounds
Port Arthur, Texas Low-density polyethylene 190 million pounds
High-density polyethylene 540 million pounds
Victoria, Texas High-density polyethylene 450 million pounds
Morris, Illinois Ethylene 1.13 billion pounds
Low-density polyethylene 540 million pounds
Linear low density polyethylene 650 million pounds
Polypropylene 280 million pounds
Tuscola, Illinois Ethyl alcohol 50 million gallons
Diethyl ether 5 million gallons
Compounds for wire & cable 36 million pounds
Microfine polyolefin powders 10 million pounds
Clinton, Iowa Ethylene 960 million pounds
Low-density polyethylene 430 million pounds
High-density polyethylene 450 million pounds
Fairport Harbor, Ohio Wire & cable compounds, color 60 million pounds
concentrates
Heath, Ohio Color, additive and foam 39 million pounds
concentrates, performance
compounds