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After the dust settles, Crompton reflects on GE deal

A marriage of convenience, Crompton Corp.''s sale last year of its organosilicones business to General Electric Co., and its acquisition of

GE Specialty Chemicals, is a transaction valued at about $1.05 billion.

M ore important, it catapults Crompton into position as one of the world''s largest plastics additives manufacturers. Meanwhile, GE''s purchase of the OSi Specialties business unit from Crompton adds a growth business that serves multiple markets and offers complementary products.

"We are very pleased to announce the completion of this transaction," states Vincent A. Calarco, Crompton chairman, president, and CEO. "We are reducing our debt by more than 40% and sharpening our strategic focus by acquiring a complementary plastics additives business."

Crompton reports that its core polymer additives business segment now comprises approximately 60% of revenue. The company, with 2002 sales of $2.5 billion, is a producer and marketer of specialty chemicals and polymer products. "We are adding products to our portfolio that we didn''t have before, so from a technology standpoint, we have a lot to work with," observes Myles Odaniell, executive VP, plastics and petroleum additives. "We now have capabilities that we didn''t have before. This will enable us to solve problems and challenges for customers and bring some unique products to market."

GE Specialty Chemicals is a supplier of secondary antioxidants and impact modifiers, products that complement Crompton''s existing plastics additives business, which services the vinyl, olefins, and styrenics markets. Both companies essentially sell to the same customer base, providing opportunities for one-stop shopping. "With this addition to our portfolio, we will have a significant position in each major segment of the value chain, from monomers to polymerization, finishing, compounding, and fabrication," Calarco says. "Combining our plastics additives expertise with our polymer processing capabilities through our Davis-Standard equipment business gives us a distinct competitive position in the polymer industry."

Trade names, such as Blendex Impact Modifiers and Ultranox and Weston Antioxidants, are expected to remain the same. And while Crompton is trimming its sails in the wake of selling the OSi business to GE, the Morgantown plant is viewed as an efficiently running operation, and therefore, should not be particularly disadvantaged, Odaniell says.

The other side of the coin

OSi, a global supplier of silanes, specialty silicones, and urethane additives, adds more than $450 million in annual sales to GE Silicones, as well as a history of innovation in its target markets. GE officials say the move allows it to deliver better technologies and application development services to global customers. "The combination will allow us to further enhance our global leadership role as a natural outcome of enhanced customer support," says Wayne Hewett, GE Silicones-OSi Specialties VP and general manager. "The ability to offer global product support has been greatly strengthened by this marriage."

GE Silicones plans to offer a unique technology and development support base to customers as they seek new and better ways to create their products. As a result, Hewett says the GE Silicones organizational structure was changed to focus on specialty products for key markets, such as coatings, paper, plastic, and rubber. In addition, GE Silicones is streamlining management of core products to aid competitive pricing.

The fallout

How the transaction will affect the landscape that GE and OSi play on depends largely on whom you ask. "Both entities have a reputation for market leadership," Hewett observes. "We expect that our new leadership position will be synergistic, supported by exponential expansion in our technology knowledge base."

Dow Corning, which competes against OSi, offers a different perspective. The company reports that it, too, offers not only products and services, but also solutions to address a broad range of customers'' needs. "We fully expect to continue as an outstanding supplier of specialty chemicals and have recently invested in expanding our silanes capabilities," says Kevin Wiggins, a Dow Corning spokesman. "Our entry into the green tire market is an example of our competitiveness in silanes."

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