Eastman purchases ‘green’ company
By Jeff KeelingPress Business Editor
jkeeling@johnsoncitypress.com
KINGSPORT — Eastman Chemical Co. is buying a “green” company with some green it’s been saving, and expects the purchase to add green to its bottom line, the company said in a St. Patrick’s Day announcement.
Pending regulatory approvals, Eastman will acquire Genovique Specialties Corp., and in one fell swoop become “a global leader in non-phthalate plasticizers for both general purpose and specialty markets,” according to an Eastman news release. The company expects to fund the purchase, whose terms aren’t being disclosed, with available cash.
The upshot is that Eastman will produce more of the environmentally friendly chemicals that are winning the battle for market share, and produce them in places where markets are growing. The company expects the acquisition to increase its earnings as early as the end of this year.
“We’re very excited about today’s announcement,” Eastman’s Tracy Broadwater said Wednesday. “This is a good example of our strategic uses of cash. Our mandate is clearly growth, and ... during the recession our priority was to preserve cash because we want to be able to take advantage of these kinds of opportunities.”
The Genovique purchase, which Broadwater called Eastman’s “most significant acquisition in some time,” also plays into two of Eastman’s other primary growth strategies: tapping emerging markets and focusing on environmentally friendly chemical products.
“We take our cues from our customers, who take their cues from consumers,” Broadwater said of the trend toward “greener” products. She said sustainability is one of Eastman’s “platforms for growth, so certainly our (research and development) efforts reflect that.”
In the case of Genovique’s core products, regulatory changes and shifting consumer preferences are driving rising demand, with the current $9 billion global market expected to grow by 7 percent a year over the next half-decade.
“This acquisition aligns with Eastman’s strategic goals of investing in differentiated, sustainably advantaged products and diversifying into emerging geographies,” Eastman CEO Jim Rogers said.
Genovique produces specialty plasticizers, benzoic acid and sodium benzoate and had sales of about $135 million last year, equaling about 2.7 percent of Eastman’s total 2009 revenues, though Eastman said those revenues are in not just a high growth market, but a high margin one. It has manufacturing in Chestertown, Md., in Estonia, and a joint venture in Wuhan, China, all of which will join Eastman’s performance chemicals and intermediates segment.
Like Eastman, Genovique has “a strong R and D pipeline,” according to a statement from its chairman, Tim Zappala.
Broadwater said Genovique’s already established global presence is another plus.
“We’re increasing our global footprint in developing countries that give us access to emerging markets, so all of this fits very nicely with those major themes,” she said.
A private equity company, Arsenal Capital, purchased Velsicol Chemical Corp. in 2005 and renamed it Genovique. It shuttered a plant in Chattanooga, established the joint venture in China, focused on “growing trends towards environmental and health-friendly products” and improved its profitability, according to a separate news release.
The Genovique plasticizers are based on benzoic acid and mostly used in adhesives and sealants, coatings, and PVC markets. Plasticizers are chemical additives that increase the flexibility or fluidity of materials ranging from plastics and concrete to wallboard.
Recent studies have reached different conclusions about the potential risks of plastics that contain phthalates. The same is true for another product, bisphenol A, which has lost favor in the marketplace despite the lack of conclusive evidence that it threatens human health.
Eastman has also capitalized on the BPA issue with its BPA-free “Tritan” copolyester, which is finding its way into numerous consumer products and is produced in Kingsport. And last year, Eastman won an Environmental Protection Agency “Green Chemistry Challenge Award” for finding a much greener way to produce the esters used by the thousands of tons in the cosmetic and personal care industry.
Broadwater said it’s too early to tell whether Eastman will add to the 250 employees currently working at Genovique.
“We made this acquisition to grow,” she said.
“We’re still in the very early stages, but we’re anxious to get in and learn even more about their capabilities.”
Eastman stock closed the day up 1.5 percent to $63.12 a share — its highest level since July 24, 2008.