- The Washington Times - Monday, March 29, 2004

Millennium Chemicals Inc. yesterday said it will merge with Houston-based Lyondell Chemical in a stock deal to create the third-largest public chemical producer in North America.

Hunt Valley, Md.-based Millennium, a top producer of the white pigment used in paint, said its shareholders will receive between 0.95 and 1.05 shares of Lyondell stock for every Millennium share, depending on the value of the companies’ shares at the closing of the deal. Based on yesterday’s share prices, the deal would be worth about $2.3 billion, including $1.3 billion in Millennium debt. It is expected to close by the fall.

Under the deal, Lyondell will become the parent company of Millennium and Equistar, another Houston chemical manufacturer that is now partially owned by both companies.

“Size alone is not our only goal … but it does offer efficiencies and will allow us to lower costs and service our markets as efficiently as possible,” said Lyondell President and Chief Executive Officer Dan F. Smith.

Lyondell said it would save about $50 million each year beginning in 2005, and would get a revenue boost from Millennium’s sale of titanium dioxide, or TiO2, a chemical used in paints and other coatings.

Company executives said there would likely be some job cuts as a result of the merger, but that layoffs would not be widespread. The new company will have about 10,000 workers and facilities in 16 countries.

“We are putting together a substantial company,” said Robert E. Lee, Millennium’s chairman and chief executive officer. “When we looked at these two companies together, the similarities nearly leapt off the page.”

Shareholders from both companies are expected to approve the deal because it adds to Lynondell’s earnings potential while providing Millennium shareholders a dividend — something they have not received since the company stopped payments in June.

“Overall, the transaction is expected to bolster Lyondell’s business profile … and will add a measure of diversification to Lyondell’s product portfolio,” said Standard and Poor’s analyst Kyle Loughlin. He said his company might downgrade Millennium’s corporate credit rating because Lyondell might make financial moves that would hurt Millennium’s credit, but not its own.

Millennium reported a net loss of $120 million, or $1.87 per share, for the fourth quarter of 2003, compared with a net loss of $2 million, or 3 cents per share, for the like quarter of 2002.

Lyondell reported a net loss of $77 million, or 44 per share, for the fourth quarter of 2003, compared with a loss of $93 million, or 58 cents per share, for the quarter one year earlier.

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