Life will not change much for 505 Millennium Chemical Inc. employees in Maryland now that they have become part of competitor Lyondell Chemical Co., the Houston-based company said yesterday.
Lyondell completed its $2.7 billion acquisition of Hunt Valley-based Millennium Chemical at the close of business Tuesday, creating the world's fourth-largest chemical producer but eliminating another of Maryland's corporate nameplates. Last month one of the best- known, the Rouse Co., was purchased by a Chicago competitor. At least 15 other major corporations have been bought by out-of-state competitors in recent decades.
Lyondell issued stock worth about $1.6 billion to Millennium shareholders and assumed about $1.1 billion in Millennium debt.
In its first day as a merged company, Lyondell, which has 10,000 employees worldwide and combined annual sales of $12 billion, said some accounting and other administrative functions at Millennium's corporate headquarters will be moved to Houston.
The bulk of the company's manufacturing operations at Hawkins Point, where it employs 165, and at its St. Helena plant on Broening Highway, where it has 65 employees, will be untouched. A research center in Glen Burnie, with 100 employees, also will continue to operate, Lyondell said.
"There will certainly be some synergies in select areas where there will be a need to consolidate those positions in one location," said David Harpole, a spokesman for Lyondell in Houston. "To a large extent, the business operations of Millennium will continue as a standalone business in the initial months as we consolidate these businesses into Lyondell."
Harpole said it was premature to speculate on how many of the roughly 175 Millennium jobs in Hunt Valley might be lost. The merger triggered change-of-control benefits of upward of $170 million for top brass at both companies. Those included up to $10 million in cash and stock options for Millennium CEO Robert E. Lee and $1.4 million in cash and stock options for former CEO William M. Landuyt, who resigned in 2003.
Production of Millennium's signature product, titanium dioxide, will continue to be managed out of Hunt Valley, which means some key managers will be based in Maryland. Titanium dioxide is a white pigment used in paper, paints and other industrial uses. Lyondell will be the world's second-largest producer of the chemical, behind DuPont Co.
"The expertise for the [titanium dioxide] business is located in the Hunt Valley offices and that's how we anticipate operating that business at this time," Harpole said.
But losing another corporate headquarters will deal an incremental blow to more than the state's ego. Anirban Basu, chief executive of Sage Policy Group, a Baltimore economic and policy consulting firm, said the sale will move corporate decision-making to Houston, severing some of the company's economic ties to Maryland.
"For instance, it is bad news for architects, engineers, attorneys, accountants and others when the gravity of decision-making authority leaves the Baltimore metro area ... because those decision-makers are likely to utilize architects, engineers, accountants, etc. from their own communities," Basu said.
Aris Melissaratos, Maryland's secretary for business and economic development, said in a statement that Lyondell will be an asset for the state.
"We are very pleased that Lyondell, through its acquisition of Millennium Chemical, has chosen to remain a presence in Maryland," the statement said.
Analysts praised the deal, saying the combined company will be stronger in a market that is rebounding after five years described by Harpole as "the worst in the last 30 years" for the chemicals industry. Industrial demand for chemicals plummeted with the stock market in recent years, but is enjoying solid sales as manufacturing activity picks up.
Lyondell and Millennium reported quarterly profits this year after suffering $302 million and $184 million in losses, respectively, for 2003. Millennium will be a wholly owned subsidiary of Lyondell, but will continue to market its titanium dioxide, acetyls and specialty chemicals under the Millennium name. The two will remain separate companies for legal purposes. Equistar Chemicals, a joint venture between the companies, also will become a wholly owned subsidiary.
In August, Millennium restated earnings for 1999 through 2003 after the Securities and Exchange Commission looked into its income tax calculations related to Millennium's 29.5 percent stake in Equistar.
Lyondell will be second to Dow Chemical Co. as a producer of ethylene, which is used in rubber and plastics.
"The two companies are a better company together," said Ivan Feinseth, an analyst with Matrix USA in New York. "They get more value when they add Millennium to their balance sheet and, hopefully, they can improve the return on capital."
Feinseth rates Millennium shares a "buy," but has maintained a "sell" rating on Lyondell.
Shares of Lyondell rose $1.02, or 3.6 percent, to $29.08 yesterday on the New York Stock Exchange, the highest since July 1998.