THE WALL STREET JOURNAL: Shell, BASF Sell Plastics Venture To Consortium for $5.7 Billion

THE WALL STREET JOURNAL: Shell, BASF Sell Plastics Venture To Consortium for $5.7 Billion 

6 May 2005

A WALL STREET JOURNAL ONLINE NEWS ROUNDUP

LONDON — Royal Dutch/Shell Group and BASF AG of Germany agreed to sell their joint plastics venture — a giant manufacturer of basic materials used in everything from diapers to auto parts — to a consortium led by New York-based Access Industries and Chatterjee Group of India for €4.4 billion ($5.7 billion), including debt.

The transaction is subject to approval by regulators and is expected to close in the second half of 2005.

The two companies established the joint venture, Basell NV, as an independent company in 2000 to consolidate their polyolefins businesses across the world. They said Basell has achieved competitive advantages such as cost leadership through world-scale plants, and has developed into one of the world leaders in its industry.

Dr. John Feldmann, member of the board of directors at BASF and chairman of Basell’s supervisory board, said: “The strategic divestment will now create additional value for the BASF Group as part of the company’s ongoing portfolio management. In its Plastics segment, BASF will continue to focus its strategic position on styrenics, performance polymers, polyurethanes and their related value chains.”

Fran Keeth, executive vice president of Shell Chemicals said, “the divestment enables Shell to optimize shareholder value and focus on our strategy of leveraging the synergies between oil products and chemicals activities, to strengthen our core portfolio in Europe and North America, and to grow in Asia and the Middle East.”

Chatterjee Group is an investment partnership run by Purnendu Chatterjee, a West Bangal native who has invested in Haldia Petrochemicals, based in Calcutta, and serves as deputy chairman of the company. Access Industries is run by Leonard Blavatnik, a Russian-born billionaire who made his fortune in the Russian oil industry.

Dr. Chatterjee praised Basell’s “broad-based customer portfolio, premium market position and leading capability in product and process innovation. We look forward to consolidating Basell’s global leadership position through enhanced commitments in technology.”

Basell has manufacturing operations on five continents and sells to more than 4,000 customers in more than 120 countries. The joint venture doesn’t disclose financial details, though it says it has annual revenue of €6.7 billion.

The move comes as demand in the heavily cyclical plastics industry has increased amid a rise in world-wide manufacturing activity. At the same time, rising energy prices — particularly for natural gas, a common plastics feedstock — have put cost pressure on plastics makers. Many of them have successfully passed those costs on to their customers. In April, Basell increased prices by €70 a metric ton on polypropylene and polyethylene grades sold in Europe, citing higher raw materials and energy prices.

Based in Hoofddorp, the Netherlands, Basell is the world’s largest producer of polypropylene, a material used in making bottles, food and beverage packaging, grocery bags and toys, among other things. The company’s products also are finding a growing market in the auto-parts industry.

Haldia Petrochemical also makes polypropylene and polyethylene, Basell’s two main products. The company has plants in Chennai, Delhi and Bombay. The firm is closely held by West Bengal Industrial Development Corp., Chatterjee Group and Tata Group, one of India’s largest conglomerates with $14.25 billion in annual revenue.

Shell and BASF said in July they planned to find a buyer for the Basell joint venture. The move is part of Shell’s vow to sell as much as $12 billion of noncore businesses in the next three years.

For instance, Shell and partner Bechtel Group Inc. of San Francisco recently agreed to sell most of their InterGen NV power-plant business to the private-equity arms of New York insurer American International Group Inc. and the Ontario Teachers’ Pension Plan for $1.75 billion. Shell also is in the process of selling its British liquefied-petroleum-gas unit.

–Jason Singer contributed to this article.

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