Big Swap Between
Corporate Giants

It won't be complete for a while yet, but the January 2003 deal between New Jersey-based Honeywell Corp. and Germany-based BASF Corp. promises to have its share of asset management implications. In exchange for $90 million and the nylon fiber business unit of BASF, Honeywell is selling its engineering plastics unit. Both units showed $350 million in sales in 2001. And for both companies, the deal extends internal restructuring efforts.
        Honeywell will receive $170 million in cash and all of BASF's nylon fiber business at closing. Honeywell will then pay $80 million to BASF within one year of the transaction's close. As a result of the nylon capacity increase, Honeywell expects increased utilization of its Hopewell, Va., caprolactam manufacturing facility that will supply nylon feedstock to the combined business as well as its fiber and plastics customers.
        "The combination of Honeywell's and BASF's nylon fiber businesses will result in greater economies of scale and increased cost synergies providing a stronger, more valuable business with more strategic opportunities and flexibility in the future," says Nance Dicciani, President and CEO of Honeywell Specialty Materials.
        The transaction will include fiber and polymerization manufacturing plants, research facilities and sales offices in North America from both companies, with manufacturing plants in South Carolina, Virginia, Canada and China. The businesses currently employ approximately 1,600 BASF personnel and 2,500 Honeywell personnel, although only 500 Honeywell employees are part of the engineering plastics division. BASF's fiber intermediates plants in Freeport, Texas, and Enka, N.C., as well as its related facilities outside North America (except the Hua Yuan nylon carpet fibers plant in Shanghai, China), are not included in the sale.
        Phyllis Vance, communications manager for the fibers side of BASF, said an integration team made up of people from both companies, as well as various sub-teams, have already held several face-to-face meetings and are in constant communication as the transition unfolds.
        For its part, BASF has raised prices on several fiber and polymer lines, and has slashed its North American polystyrene capacity by 12 percent. But this move will only strengthen the company's plastics business. Together with BASF's engineering plastics and nylon intermediate activities, the combined businesses would have had pro-forma sales of almost $2 billion in 2001.
        "With these portfolio changes, BASF is strategically realigning and enhancing its market position in plastics," says Dr. John Feldmann, the member of the Board of Executive Directors of BASF Aktiengesellschaft responsible for the Plastics & Fibers segment. Specific markets to benefit will include the automotive, packaging and electrical and electronics industries.

World Production Picking Up Steam

Of course, the Honeywell deal is not all on BASF's plastics plate. At the Shanghai Chemical Industry Park at Caojing, Shanghai, China, the company is employing popular engineering, construction and services firm Technip-Coflexip in the construction of an integrated production facility for polytetrahydrofuran and tetrahydrofuran, both materials used in the making of synthetic elastic fibers. Scheduled for completion in 2004, the complex will be the largest production facility for these specialty ingredients in the world. In 2002, Technip-Coflexip also won contracts for another BASF facility (a Syngas plant in Nanjin) and a complex for CNOOC/Shell Petroleum in Huizhou that will produce styrene monomer, among other products.
        Indeed, China continues to be the place to be for plastics, as well as any other manufacturing sector. United Plastics Group (UPG), based in Westmont, Ill., has started operations at the first of three plants the company hopes to build in China in 2003, a 24,000-sq.-ft. (2,230-sq.-m.) injection molding facility in Suzhou.
        "Our new plant in Suzhou will be an important gateway for us into Asia," says Lionel Liew, UPG's general manager, Asia. "Being located in the tech corridor positions us very well with global and local customers and gives us the opportunity to tap into a very skilled talent pool. There are six universities and over 70 research institutes and academies of science and engineering right here in Suzhou."
        Nan Ya Plastics Corp., a unit of Formosa Plastics Group, is investing $18.5 million in a polyester filament factory, its second on the mainland, in the Shanghai suburb of Kunshan. The company will build another polyester plant - built to produce staple fibers and chips - in another part of the country. Both plants will be completed within two years.
        Nypro, which has been downsizing in the U.S., is looking to add two more plants to its growing Chinese footprint, bringing the company's total facilities there to four.
        In February 2003, Japan-based Bridgestone Corp. announced it would invest $99 million in a third Chinese tire factory, to be built in the city of Wuxi in Jiangsu Province. The company already operates a car tire plant in Tianjin and a truck and bus tire plant in Shenyang. The company is also currently building a plant in Thailand to serve the booming Asian market.
        That boom has convinced Massachusetts-based GE Plastics, which is moving its Asia Pacific headquarters to Shanghai. The business unit currently employs approximately 750 people in China, with compounding facilities in Nansha and Pudong, Shanghai, and an eSolution Center and Customer Innovation Center also in Shanghai. The business unit has invested about $30 million in the last three years in the Shanghai facilities. What's more, GE Plastics will establish a new Technology Center on the premises of its new GE Global Research Center, scheduled to open in Shanghai in 2003.