Sale affects 400 here at 3 Millennium sites

Properties are part of Lyondell chemical unit sold to Saudi firm

February 27, 2007|By Allison Connolly | Allison Connolly,SUN REPORTER

Three Millennium Chemicals properties here are being sold again, this time to a foreign owner. In all, more than 400 workers in the Baltimore area would be affected.

Lyondell Chemical Co. of Houston has signed a deal to sell its Millennium inorganic chemicals business, which includes a titanium dioxide plant in Hawkins Point, offices in Hunt Valley and a research facility in Glen Burnie, to National Titanium Dioxide Co. Ltd. of Saudi Arabia for $1.05 billion in cash.

Including some liabilities, the deal is expected to be worth about $1.2 billion and close during the first half of the year, pending regulatory approval.

The transaction does not include Lyondell's St. Helena plant in East Baltimore, which employs about two dozen workers making fine particle silica gels.

Lyondell, the world's fourth-largest chemicals maker, acquired the Maryland properties in 2004 with the $2.7 billion purchase of Hunt Valley's Millennium Chemicals Inc., which retained its name and operates as a subsidiary. Millennium is the world's second-largest manufacturer of titanium dioxide, a white pigment used in everything from paint and sun block to the writing on M&Ms.

The Hawkins Point plant manufactures titanium dioxide from raw titanium ore. In Glen Burnie, the company conducts scientific research on improving the inorganic chemical and finding new uses for it. In Hunt Valley, Millennium maintains administrative offices at its former corporate headquarters.

Lyondell employs 10,000 worldwide, including nearly 450 in the state. About 2,900 employees are considered part of the inorganic chemicals business that is being sold to National Titanium Dioxide.

The sale would mark the first major foray into the United States for National Titanium Dioxide, which sells the pigment in 70 countries.

The company, also known as Cristal, said yesterday that it would continue operating the Lyondell assets as they are, but declined to comment further, said Kristin Sadlon, a spokeswoman for the private Saudi firm.

With the acquisition, Cristal will add operations in Australia, Europe and North and South America.

"We have been impressed with the high quality of the employees, products and R&D," said company Chairman and Chief Executive Officer Talal Al-Shair.

Jim Strong, sub-district director for United Steelworkers District 8, said members of Local 14019, which represents Millennium's Hawkins Point employees, have been speculating that the plant might be sold.

The questions arose last year when the company declined to negotiate a new three-year contract. Instead, the two sides agreed to a one-year extension of the existing contract that allows for wage increases.

The contract ends later this year, Strong said, but workers hope they will be able to establish a relationship with the new owner in the same way they did with Millennium and Lyondell.

"There are always concerns about the unknown," Strong said.

The Hawkins Point plant was built in 1954 by the Glidden Co. and at one point employed as many as 500. It now has about 170 employees and contractors.

The inorganic chemicals business is the smallest of Lyondell's four operating segments and has struggled in the past year. The deal announced yesterday does not include: Millennium Petrochemicals, Millennium Specialty Chemicals and Millennium Holdings LLC.

The market for titanium dioxide is directly tied to consumer discretionary spending, particularly in the housing market, which has been weak, said David Barry, markets reporter for the chemicals and oil trade publication ICIS. The pigment is used in paints and coatings.

"Any time people aren't buying houses or remodeling, there's less demand for [titanium dioxide]," he said.

Cristal is a medium-sized company that is expanding in Saudi Arabia, Barry said. He was surprised to learn that Cristal had the winning bid. Last month, Lyondell said it had narrowed the list of potential bidders to five to 10, and Barry expected the winner to be one of the big companies.

If the deal goes through, Lyondell will take a charge of $549 million for impairment of goodwill in the fourth quarter, reducing earnings for the three months ending Dec. 31, 2006, to a loss of $321 million, or $1.29 a share. Net income would be $186 million or 72 cents a share for all of 2006.

It is not clear whether Cristal will establish a new management team here or allow operations to continue with minimal input from overseas. Neither company mentioned layoffs yesterday.

"They realize that our employees are an important part of the assets they are purchasing," said Lyondell spokesman David Harpole.

Lyondell stock closed up $1.10 yesterday to $33.04 a share.

allison.connolly@baltsun.com

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