Dow spins off latex, plastics divisions to form Styron

Home Inside FCNews Dow spins off latex, plastics divisions to form Styron

HICKSVILLE, N.Y.—One year after announcing its intention to package its emulsion polymers and plastics businesses into a standalone company known as Stryon, the Dow Chemical Co. announced it has sold the newly formed unit to Bain Capital Partners for $1.63 billion. Bain plans to run Styron as a standalone, privately held business once the transaction is completed later this summer.

Styron immediately becomes a large player in the flooring industry as it is considered to be the world’s No. 1 supplier in terms of volume of SB latex which is used to make such things as carpet backing products. As such, it is the No. 1 supplier of this type of product to the global carpet industry with such brands/technology as Lomax and Everest, along with other products including HPL latex, vinyl acrylic latex, Styrene-Butadiene latex and more that are used for residential and commercial broadloom, modular, needle punch, tufted carpet, underlayment and woven applications.

Corporately, Styron began as a $3.7 billion operation with more than three-dozen manufacturing and R&D sites around the world, and 1,900 employees. The company is set up to run as two separate business units: Emulsion Polymers, which includes the latex and rubber businesses, and Plastics, which includes polystyrene, co-polymers, polycarbonate, expandable, polystyrene (EPS) and, compounds and blends, as well as automotive plastics. 30-year chemicals and plastics industry veteran Christopher Pappas has been named Styron’s president and CEO. Pappas’ appointment is a

coming home of sorts, as he started his career in 1978 with Dow, holding a variety of positions until 1995 before joing DuPont Dow Elastomers in 1996 and then Nova Chemicals in 2000, where he served as president and CEO.

Flooring important element

The Emulsion Polymers unit did $1.5 billion in sales in 2009, and Marco Levi, vice president of the division, said the flooring industry represented about 20%, or $300 million, making it a “significant” component of the company. This, he noted, will help put additional focus on the latex business which will allow the company to “expand and leverage our existing technologies, accelerate anything that had been on the shelf for a while and find new ways to offer our customers competitive advantages. In other words, we will be able to dedicate the level of resources needed to develop this business to reach its potential.”

While this focus on R&D will be an asset for the company and its customers moving forward, Levi said the real “good news” for supplier’s clients, which includes most of all the major commercial carpet mills, comes from the fact “nothing changes. There are no distractions; it’s business as usual.” Along with himself and his team, all front line employees, sales reps and other personnel, along with all related technologies, manufacturing and R&D that served the flooring industry under Dow are now part of Styron.

This includes the Dalton plant—one of three U.S. factories—and R&D facility Styron owns. As such, he noted at press time no decision has been made as to where the company will place its headquarters. Its other U.S. facilities are in Midland, Mich., and Allyn’s Point, Conn., with the former currently having the inside track to be the base camp.

When it comes to servicing the flooring industry, he said “Styron offers a wide variety of materials to meet the industry’s specific needs. Our latex is used to impart specific physical properties to the finished carpet, including dimensional stability and stiffness. And they can be used to enhance a carpet’s performance properties, including ignition resistance and moisture barrier.”

Styron also offers products with a sustainable edge, he added, noting the company will continue the “legacy” of not only being environmentally responsible but offering “innovative, cutting-edge” sustainable solutions.

One of the prime examples in this area that he pointed to comes from Stryon’s flooring operations, namely its Lomax technology. First introduced two years ago (FCNews, July 21/28, 2008), Lomax is the brand name of the technology used to pipe methane gas from the Dalton-Whitfield Solid Waste Authority, i.e., the Dalton landfill, to the company’s nearby latex carpet backing plant.

According to the company, Lomax uses approximately 240 billion Btu annually of landfill gas, which is equivalent to the amount of energy required to heat 2,100 U.S. homes annually. In addition, carpet backing manufactured with the technology has the same impact on the climate as if 13,500 cars were kept off the road each year. Since being launched, Styron estimates more than 74 million pounds of CO2 emissions have been reduced. If measured by oil consumed, the company is replacing more than 200,000 barrels annually.

Dow still around

While Dow spun off $3.7 billion worth of assets as it continues a long-term strategy of divesting non-strategic business units that can “no longer compete for growth resources inside the company,” noted Andrew Liveris, chairman and CEO, the company will not be out of the flooring industry.

In fact, it will be represented through its continued businesses that serve the industry, namely from its polymers, polyurethanes and olefins businesses which go into a variety of flooring-related products from carpet backings, adhesive formulations for carpet tile to floor sealants and polishes. Its most notable are the Enhancer, Enforcer and Hypod carpet backing products

In addition, as part of the transaction with Bain, Dow had an option to receive up to 15% of the equity of Styron (Editor’s note: FCNews learned the final percent- age will be closer to 11%). Plus, the deal includes several long-term supply, service and purchase agreements to generate “substantial value” for Dow and Styron.

Steve Zide, a managing director at Bain, noted having Dow as a long-term partner is a positive strategic move. “Dow’s culture of global excellence and integrity is well-represented in Styron and its people, and we are delighted to embark on a long-term partnership.”

For more information on Styron’s flooring businesses, call 989.633.1718. For more about Dow’s flooring operations, call 800.258.2436.

-Matthew Spieler

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