Houston-based Lyondell Chemical Co. on Monday announced that it is acquiring Hunt Valley, Maryland-based Millennium Chemicals in a $1 billion all-stock deal that includes assumption of $1.3 billion in debt. The transaction will make Lyondell the third-largest publicly traded U.S. chemical production company.
The deal combines two struggling commodity chemical producers that have combined revenue of over $11 billion. The theory behind the deal is that the larger company is necessary to compete in the increasingly difficult chemicals industry. High prices of natural gas — which producers use as a key raw material — have rocked the chemicals industry at the same time as it has been dealing with the dual problems of overcapacity and large debt acquired during the better days of the 1990’s. Although the industry has rebounded moderately, the consensus is that the industry will not return to the glory days of the mid-1990s anytime soon.
Lyondell reported a loss of $302 million last year while Millennium had a net loss of $184 million, and Lyondell expects the deal to save the combined company $50 million. The combined company will keep the Lyondell name, maintain its headquarters in Houston, and employ about 10,000 people world-wide. Lyondell Chief Executive and President Dan F. Smith will keep that role in the combined company, while William T. Butler will remain chairman.