Friday, June 10, 2005

Not necessarily one for the widdows and orphans

Chemical News and Intelligence, the subscription only online news service for the chemcials sector posted this yesterday:

Titanium dioxide (TiO2) pigment producer Kerr-McGee said Wednesday its chemicals subsidiary had filed an initial public offering (IPO) for as much as $300m (Euro243.9m) in Class A common stock.

Oklahoma City, Oklahoma-based Kerr-McGee said the IPO by New-Co Chemical - an indirect wholly-owned subsidiary of Kerr-McGee formed 17 May to hold the company's chemical business - was one of two options it was considering.

The other, a spokeswoman told CNI, was a sale of the chemical business.
She added: “It’s all part of the evaluation process. We have not announced a decision on what we will do. We are considering all options to maximise shareholder value.”

I am not qualified to offer investment advice and this should not be read as if it were...

You’d have to be pretty brave, on the face of things, to take part in the IPO that Kerr-McGee is proposing as one route to exit its Titanium dioxide business.

The possible IPO in a company --imaginatively named New-Co Chemical -- would see investors being offered A-series shares in the indirectly owned business.

All well and good but, a bit of digging through the S3 form on Edgar (an exemplary website which all stock market regulators would do well to copy), and you can unearth some interesting tid-bits.

Not only is Kerr-McGee considering offering A shares it will be retaining B shares, with potentially greater voting power (no mention is made in the S3 about how the two will rank). Kerr-McGee will retain these shares at least at first.

Kerr Mc-Gee will also be giving New-Co Chemical several presents. In addition to the facilities it would need to process titanium dioxide, the firm plans to off load some others from heritage businesses, notably facilities processing uranium and thorium and others handling wood preservatives.

The world has been structurally over supplied with Titanium Dioxide capacity since the early 1990s.

Analysts suggest DuPont with about 1m tonne/year capacity and 23% of the market-- close to twice the size of New-Co Chemicals--is probably the only one of the five companies that control 70% of the business making a profit at the moment. Plant utilization crept up to around 95% in 2004 after a round of plant closures, destroying capital invested. Prices have been wallowing around $1/tonne for the past five years.

Would sound tastier with some jam for the investor.

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