SCM Chemical's rich parent looks for some friends


June 09, 1991|By Thomas Easton | Thomas Easton,New York Bureau of The Sun

In a story on SCM Chemicals last Sunday, The Sun incorrectly stated the increase in the company's titanium dioxide production capacity since its acquisition by Hanson Industries in 1986. Overall capacity has increased 73 percent; capacity per employee has increased 56 percent.

The Sun regrets the errors.

New York -- SCM Chemical opened its South Baltimore plant to local visitors this weekend for the first time in three decades to foster a neighborly feel.

Being neighborly is far removed from the caustic descriptions often leveled against SCM's parent, Hanson Industries, a conglomerate that has bought and chopped its way to become an international power in just a few frenetic decades. But now the company has reason to be looking for friends, and SCM, which has become a striking success since being acquired by Hanson five years ago, isn't a bad place to start.


For Hanson may have a truly gigantic deal in the works. In mid-May it loudly took a 2.8 percent stake in Imperial Chemical Industries "for investment purposes." Ever since, people have been wondering what that means. A common guess is a blockbuster takeover in the 1980s mold.

A combination of the two conglomerates would probably trigger other transactions as decisions are made on the fate of hundreds of subsidiaries, including SCM and a major competitor owned by Imperial.

Like Hanson, Imperial Chemical is a multinational conglomerate born in the United Kingdom. But unlike Hanson, a spectacular financial success, Imperial's results, and shares, have languished. Twenty years ago, according to a Morgan Stanley study, Imperial had the 14th-highest market capitalization (stock price times the number of outstanding shares) in the world and the third-largest in the United Kingdom. Hanson at the time had been public only seven years; it was still an industrial midget.

At the end of April, after two decades of single-digit appreciation, Imperial no longer qualified for the top-10 list in the United Kingdom, let alone the top 20 in the world, while Hanson was No. 5 on the U.K. top 10. Combining with Imperial would make it No. 2 in the United Kingdom, and, based on its annual appreciation rate of close to 25 percent, a chartist would conclude Hanson is only a few years away from a place in the global top 20.

While share price may be the entire story for a shareholder, it's only one aspect of a company. Hanson and Imperial reflect not only diferent results but different strategies. Imperial has, like many chemical giants, been forced to wrestle in recent years with tremendous challenges, ranging from stiff environmental costs to complicated research for advanced products. Hanson has focused less on a product category and innovation than results, masterful acquisition, cost-cutting and divesting. As a result, Hanson has produced a more brilliant bottom line, but Imperial has produced more brilliant products, including effective medications for cancer and hypertension.

Is one style wrong and another right? The English papers, which unlike their U.S. counterparts overtly give a perspective with the news, have had a field day with this question. Responding to the prospect of a deal, a columnist in the Guardian of London described Hanson's chairman, Lord Hanson, as "a cannibal with irreproachable table manners." But the Economist (chaired by a former Imperial executive) flatteringly describes Lord Hanson as "a consummate dealmaker." The Guardian tends to focus on Hanson's minimal investment in research and development, the Economist on its effective allocation of resources.

The U.S. markets and the various groups that tend to become enmeshed in major deals, like Congress and affected communities, have been more reserved. On the New York Stock Exchange, trading in the companies' American Depository Receipts (the U.S. equivalent of the British shares) is about 40 percent above average -- high, but not very high.

Similarly, labor unions, citizens groups and Congress have been silent. This could suggest a more laissez-faire approach to business in the United States. It also could mean the significance of any combination of the two companies has eluded the gallery.

Neither Imperial nor Hanson maintain splashy U.S. headquarters, nor do they plaster their name on prominent consumer products. But they are both major U.S. companies whose products are in every home.

Hanson is a major domestic producer of shoes, toys, cranes, batteries, coal and so on. Hanson employs more than 50,000 people in the United States and sells about $6.5 billion in goods, ranking 75th on the Fortune 500.

Imperial's U.S. operations, headquartered in Wilmington, Del., sell about $4.5 billion (equivalent to about 125th on the Fortune list) and employ 20,000 people. The company's interests span the gamut from creation (seeds) to destruction (explosives) and include a billion-dollar pharmaceutical operation.

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