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BREAKING NEWS: Sale of Air Products Polymers Would Change Competitive Landscape for SLPs

April 1, 2006
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LITTLE FALLS, N.J. - Potential buyers for Air Products' polymers business could see themselves leapfrog to the front of the synthetic latex polymer (SLP) market in both the United States and Europe with the purchase of a leading supplier in the vinyl acetate-ethylene (VAE) business.

The company announced its intentions last week to explore the possible sale of its amines and polymers businesses, and analysts from Kline & Company, a global business consulting and market research firm specializing in the chemicals and materials industries, are calling these businesses a smart buy for the right investor.

As the largest U.S. producer of VAE latexes, Air Products Polymers - a joint venture between Air Products and Chemicals, Inc. and Wacker-Chemie GmbH - holds more than 60% of the domestic market, according to Synthetic Latex Polymers Market Analysis, a series of Kline studies examining global SLP markets and manufacturing. In Europe, Air Products is the second leading producer of VAE, with a market share of about 40%, just behind Celanese.

"With Air Products Polymers' position in VAE in both the U.S. and Europe, whoever ends up buying the business will gain a strong foothold in the overall SLP market," says Gillian Morris, industry manager of the Chemicals and Materials Practice for Kline's research division. "In addition to VAE, they'll also take over Air Products' position in PVAc and vinyl-acetate acrylics."

VAE is a key component in formulating adhesives and sealants, paints and coatings, and textiles and nonwoven fabrics. Overall, the VAE market is forecast to experience above-average annual growth compared with other SLP products in both the U.S. and in Europe, according to Kline.

Air Products and Chemicals holds a 65% stake in Air Products Polymers and a 20% stake in Wacker Polymer Systems; its partner in both ventures is German-based Wacker-Chemie. Wacker Polymer Systems is the leading supplier of redispersible powders, chiefly based on vinyl acetate, in Western Europe. Construction and construction adhesives are the key applications for these products in Europe.

"Air Products' VAE facilities enjoy economies of scale, but you also have to evaluate their competitive position in terms of raw material sources and against emerging producers in developing regions like Asia," adds Yuki Adachi, director of Kline's Japan branch.

The move by Air Products to look for a buyer for the polymers business comes as the company embarks on a plan to enhance its growth strategy, but CEO John Jones has said the company will only sell to a buyer who appreciates the value of the business.

Meanwhile, PolymerLatex, another global leader in the SLP market, is also up for sale. This follows Celanese's purchase of Clariant's emulsions business in 2003 and its acquisition of Vinamul Polymers in February 2005.

"The SLP industry has gone through significant consolidation within the last few years," says Morris. "It's interesting that there are now two more big SLP producers potentially on the block, each with different product ranges, serving different applications with different regions of focus."

Kline's Synthetic Latex Polymers Market Analysis is a global series of regional analyses that examines the current and forecast demand by major product and end-use industry, including information on grades, prices, applications, captive production/consumption, major customers, distribution channels, supplier sales, and technical and market trends.

A companion series of regional manufacturing cost analyses provides detailed technology and production cost structure assessments for four major latex polymer categories.

Established in 1959, Kline & Company (http://www.klinegroup.com) is an international business consulting and market research firm serving the chemicals and polymers, life sciences, consumer products, and petroleum and energy industries.

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