December 2003 Chemical Information Services Invests in South African Firm Chemical Information Services of Dallas, Texas, USA (CIS) has agreed in principle to invest in iNFOSOURCE cc of Capetown, South Africa. iNFOSOURCE is the publisher of the South African chemical directory called ChemSource. CIS will contribute cash and technology to help iNFOSOURCE migrate its products to the Internet. They will also assist iNFOSOURCE in expanding coverage of ChemSource to cover more of the African continent in addition to providing assistance and expertise on the marketing of their products. Back office systems to support iNFOSOURCE's sales and research efforts may also be included. iNFOSOURCE will co-brand its ChemSource directory with the CIS name and logo to take advantage of CIS's high quality image and worldwide recognition. The final agreement is expected to be signed by the end of the year.   Famous Quotes of the Month - It is less important to redistribute wealth than it is to redistribute opportunity. (Arthur Vandenburg) - If you wouldn't write it and sign it, don't say it. (Earl Wilson) - Genius begins great works; labor alone finishes them. (Joseph Joubert) - The minute you start talking about what you're going to do if you lose, you have lost. (George P. Schultz) - Courage is doing what you're afraid to do. There can be no courage unless you are scared. (Edward V. Rickenbacker) Why is there steam rising from the streets of New York? Con Edison, New York's utility company, generates steam to service over 2,000 customers in Manhattan. When a leak occurs in a steam pipe below ground, the steam (heat) rises and seeks a place to escape. Manhole covers provide a convenient and likely exit point for the steam. Another factor contributing to the rising steam is excess moisture condensing underground. This moisture comes from small leaks in city water mains, runoff from heavy rainfall and even sewer backups. When this moisture comes in contact with the hot steam equipment, it vaporizes and rises as steam. Dow to Continue Investments in China Dow Chemical will continue to invest in China operations and may build six or seven new plants in Zhangjiagang in East China's Jiangsu Province. The company currently produces Polystyrene, Latex and Epoxy resins in Zhangjiagang, and believes the new facilities, which will manufacture different products, will strengthen its position in the Chinese market. Dow hopes to make Zhangjiagang a regional hub and a base to build up its downstream products. To date Dow has invested $500 million in ten manufacturing bases and plants in China, most of which are located in eastern coastal areas. Huntsman Announces Further Reductions Over the next 18 months, the six Huntsman business units will implement cost reduction measures to reduce fixed costs and overhead expenses totaling $200 million. Further jobs cuts and plant closures will be announced in the near future. Most of the reductions are expected to come from European operations, and are driven by poor economic conditions. The company cut near $150 million in costs from U.S. operations in 2000. Linde to Cut Jobs German industrial gases group Linde will reduce its workforce by 500 jobs and will take an $80 million (Euro 70 million) restructuring charge. About half of the jobs will be in the material handling division and the other half from Linde Gas and the company's corporate center. Lubrizol to Reduce Workforce The Lubrizol Corporation will layoff approximately 150 employees by year end 2003 to achieve annual pretax savings of about $15 million beginning in 2004. The company will take a fourth quarter restructuring charge of nearly $13 million. According to chairman and chief executive officer W. G. Bares, "Lubrizol is consolidating positions in all divisions, in order to reduce expenses and to allow us to focus resources on growth opportunities. The steps we are taking are necessary to reposition us for a stronger future." Millennium to Divest Businesses Millennium Chemicals is reviewing its portfolio and will likely sell off its flavors and fragrances business and its 29.5 percent share of Equistar, the company's joint venture with Lyondell Chemical. The flavors and fragrances business has sales of $96 million in 2002, while the share in Equistar accounts for $3.2 billion of Millennium's earnings per year on a pro rata basis. The divestments will leave the company with its Titanium dioxide (TiO2) and acetyls businesses and will allow Millennium to reduce costs, improve cash flow, and pay down debt. Rhodia to Divest Several Businesses Rhodia has identified several businesses with a total value of approximately $1.5 billion (Euro 1.3 billion) that it may divest. According to the company, these businesses were chosen because they have an "attractive strategic positioning" without being big cash-flow contributors and potential buyers have expressed interest in them. Rhodia plans to sell only those businesses that attract the highest valuations. Also as part of its restructuring, Rhodia will reduce the number of its operations down to nine from the current 17 in order save 50 percent of its corporate structure costs. SNPE to Reduce Isochem Workforce SNPE announced that it will cut 187 jobs or 21 percent of the workforce at its fine chemicals business unit Isochem. The cuts will take place in the first quarter of 2004 and are in response to the poor economic situation in the chemical industry. These cuts follow the previous reduction of 492 jobs, when SNPE ceased production of phosgene after a fatal explosion occurred in 2001 at its AZF plant in Toulouse, France. Dow Appoints New President Dow Chemical appointed Andrew Liveris as president and chief operating officer replacing William Stavropoulos. Liveris is the past president of the performance chemicals business. Stavropoulos will continue as chairman and chief executive. The company also created an "Office of the CEO" that includes Stavropoulos, Liveris, Arnold Allemang as executive vice president and J Pedro Reinhard as executive vice president and chief financial officer. Statoil Appoints New Chairman Jannik Lindbaek, currently deputy chairman of the Norwegian Den norske Bank and head of the Norwegian branch of the anti-corruption agency Transparency International, has been appointed chairman of Norwegian oil company Statoil. Lindbaek replaces Leif Terje Loddesol, who resigned after the initiation of a Norwegian police investigation into bribery allegations surrounding Statoil's contract with Iranian consultancy Horton Investments. Kaci Kullmann Five, who acted as chairman following Loddesol's resignation, was elected deputy chair. Yukos Oil Gets New Head Yukos Chairman Simon Kukes has been appointed chief executive of Russia's Yukos Oil following the resignation of Mikhail Khodorkovsky after his recent arrest for alleged fraud and tax evasion. Kukes is expected to combine the two positions he now holds. Yukos also appointed several other personnel as management board members. The company recently merged with Sibneft, and it is anticipated that Kukes and the other board managers will be nominated by the principal shareholders of Yukos Oil for the management board of YukosSibneft. The appointments must then be approved by the new YukosSibneft board of directors. ACC Sees More Positive Economic Indicators The American Chemistry Council (ACC) believes that the estimated annualized growth rate of 7.2 percent for the gross domestic product (GDP) will lead to a stronger demand for consumer goods and in turn an increase in demand for chemicals. Growth in North America and East Asia is anticipated to be a driver for growth in the chemical industry in 2004. Western Europe is expected to lag behind. In addition to the strong rise in GDP, US chemical industry shipments, capacity utilization and production rates were also slightly up in recent months. The ACC still remains cautious, however, largely due to increased raw material and energy prices, and particularly natural gas. FDA Approves First Drug from Indian Pharma Company The FDA approved the anti-hypertensive drug AmVaz (Amlodipine maleate), which is produced by Hyderabad, India-based Dr. Reddy's Laboratories Ltd. The company is the first Indian pharma firm to receive marketing approval for a new drug application (NDA) from the FDA. AmVaz may be a competitor with Pfizer Inc.'s Norvasc (Amlodipine besylate), but is not a direct substitute since it is a completely different molecule. Dr. Reddy's is preparing for launch of AmVaz in the US, and is currently seeking a marketing partner. Merck Forms Partnership with GenPath Merck & Co. Inc. will pay GenPath Pharmaceuticals Inc., a drug discovery company, up to $100 million to identify new cancer drug targets. GenPath will use cancer models to find genes that may be treatable with small molecule drugs, and then narrow down the number of targets using tumor models. Merck will develop and commercialize the drugs based on the candidates identified by GenPath. GenPath will receive a "significant" upfront payment, annual research funding, and milestone and royalty payments if any new drugs are successful. Merck considers the partnership with GenPath a key aspect of its cancer research strategy. Alcoa Sells Specialty Chemicals Unit Alcoa World Alumina & Chemicals sold Alcoa Specialty Chemicals (ACS) to private equity firm Rhone Capital (New York) for an undisclosed sum. The sale is part of Alcoa's plan to cut costs, reduce jobs, and divest some non-core and underperforming businesses as announced earlier in 2003. ACS produces abrasives, refractory insulation, and water purification chemicals. Rhone will finance the acquisition through its Rhone Partners II L.P., private equity fund. Bayer to Spin Off Chemicals Bayer announced plans to spin off a stand-alone company formed from Bayer Chemicals and some parts of Bayer Polymers. The new publicly traded company will have sales of $6.5 billion (Euro 5.6 billion) and will be created by early 2005. The new company will offer chemicals for leather, textiles, and paper; fine chemical intermediates; inorganic pigments; ion exchange resins; polymer additives; and rubber chemicals, plus Acrylonitrile Butadiene Styrene, Nylon resins, synthetic fibers, and synthetic rubber. Axel Claus Heitmann, currently head of Bayer Polymers' Asian region and a member of the executive committee, will head the new business. The remaining polymer business will be renamed Bayer MaterialScience and will make up 30 percent of Bayer's total sales. Pharma and healthcare will account for 40 percent, and crop science will make up the other 30 percent. Bayer has also indicated that it will no longer seek a partner for its pharmaceuticals business. Great Lakes to Phase Out Flame Retardants Following discussions with the U.S. EPA, Great Lakes Chemical Corp. has agreed to voluntarily stop manufacturing the flame retardants penta- and octa-polybrominated diphenyl ether (PBDE) by the end of 2004. Great Lakes is the only U.S. producer of penta-PBDE and one of a small number of octa-PDBE manufacturers. Tests have shown that penta-PBDE bioaccumulates and is persistent in the environment. Great Lakes has developed a new alternative, Firemaster 550, which is an effective substitute with a positive environmental profile that has been approved by the EPA. Sasol to Sell Specialty Chemicals Subsidiary Sasol announced plans to divest its Sasol Servo specialty chemicals subsidiary. According to the company, several specialty chemical manufacturers have expressed an interest in the business. Servo, located in Delden, the Netherlands, produces specialty surfactants, coating additives and pulp and paper chemicals. Cephalon to Acquire Cima Labs for $515 Million Biopharmaceutical company Cephalon will acquire drug delivery firm Cima Labs for $515 million (Euro 447.8 million) in cash. The deal, which still requires approval by Cima stockholders and pertinent regulatory agencies, is expected to close early in 2004. Cima terminated a previous agreement with aaiPharma and paid that company a break up fee. The acquisition will combine the drug delivery technologies of Cima with Cephalon's clinical development, regulatory and sales and marketing expertise. Blue Star and Haohua Chemical to Merge The merger of China National Blue Star (Group) Corp. and China Haohua Chemical Industrial (Group) Corp. has been approved by China's State Council. Once formal documents are received from the Chinese government, the new company - China United Chemical Industrial Corp. - will be set up. The value of the new entity, which will have positions in basic chemicals, polymers, specialty chemicals and fertilizers, is expected to be $3.6 billion (Euro 3.1 billion, Rmb30 billion). Koch Industries Acquires Invista from DuPont Koch Industries Inc. has agreed to purchase the Invista integrated fiber and intermediates business from DuPont for $4.4 billion in cash. Invista had 2002 revenues of $6.3 billion. The deal is expected to close in the first half of 2004. Koch will gain the Stainmaster, Lycra and Coolmax brands and trademarks, as well as the specialty chemical brands ADI-Pure and Terathane. The company plans to form an independent fibers and resins firm by combining Invista with its polyester business KoSa. DuPont may use the funds to pay down debt, fund pension obligations remaining after the sale, launch a stock buyback and cover restructuring expenses to reduce cost and achieve growth objectives in its remaining five business platforms. The company will have annual sales of approximately $20 billion after the deal is closed. Kraton Polymers Sold to Texas Pacific Group Private Investment Firm Ripplewood Holdings announced the sale of Kraton Polymers Group to Texas Pacific Group, another private investment company, for $770 million. Kraton currently has sales of $600 million for its polymers, including the Kraton-D line of Styrene-Butadiene-Styrene, and Styrene-Isoprene-Styrene copolymers and the Kraton-G line of hydrogenated Styrene-Ethylene-Butylene-Styrene and Styrene-Ethylene-Propylene-Styrene products. The company is implementing expansions in these product lines that will increase its total capacity by 20 percent from current levels. The deal is expected to close by the end of 2003.