Momentive, Hexion merger expects better growth prospects

By Bruce Meyer ERJ staff (R&PN)

Albany, New York -- The now-official combination of Momentive Performance Materials Holdings Inc. and Hexion L.L.C. into one company is a move that will benefit the firm as a whole but also be good for its silicone elastomers business.

That's the view of Michael Modak, who serves as chief commercial officer for Momentive's silicone unit. “It's a great thing for us and the legacy Momentive and Hexion teams,” he said. “We're feeling good on both sides on what we have been doing.”

In early October, the two companies that were both controlled by investment funds affiliated with Apollo Global Management L.L.C. were combined into one firm, to be known as Momentive Specialty Chemicals Inc.

Momentive Performance Materials had been formed in 2006 through the acquisition of GE Advanc- ed Materials, while Hexion was created in 2005 through the combination of Borden Chemical Inc., Resolution Performance Products Inc., Resolution Specialty Materials Inc. and Bakelite A.G.

The merger creates a specialty chemicals and materials company that boasts about $7.5 billion in annual sales, gross profits (EBITA) of $1.24 billion, 117 production facilities and more than 10,000 employees. Its geographic mix shows that 39 percent of revenue comes from North America, 33 percent from Europe and 28 percent in the world's fastest-growing regions, including Brazil, Russia, India and China.

Modak said there is not much duplication within the two businesses, adding that Hexion generally concentrated on larger accounts while Momentive tended to be more niche-oriented. The firm now will evaluate where both may be in the same general business areas or share customers where the new company can be a more effective supplier.

“Both sides have some ideas, but we will understand it more fully in the near future,” the executive said. “We expect to find things that add value to our customers and sales to our organisation.”

While it's likely that with a business of this magnitude there will be some operational synergies, Modak said he's more excited about the growth potential.

“We may find common accounts and applications, and ways the technologies may complement each other,” he said. “It's a longer trail to blaze, but we will be evaluating these things as we move forward.”

Boost for silicone elastomers

The silicone elastomers business will be part of a new global Silicones & Quartz Division, of which Steven Delarge, previously president of the Americas for Momentive, will serve as president. Jonathan Rich, who was Momen- tive Performance Materials president and CEO, was named chairman and CEO of Berry Plastics Corp., another Apollo-owned business.

Modak sees Delarge's presence as a big plus for the silicone elastomer unit. Modak noted that Delarge came to Momentive with the GE purchase and was chief financial officer when it became part of Apollo.

“He knows this space and knows this company and is a very strong leader,” Modak said. “We all look forward to being part of the organisation with Steve.”

Momentive's overall silicones sales-including materials other than elastomers-totaled $585.4 million for the quarter ended Sept. 26, an 11.8-percent increase from a year earlier.

Modak also doesn't give much credence to those who look at silicone elastomers as a mature business without many opportunities for growth.

“Every business we're in-and any com- pany for that matter-has a certain degree of maturity,” he said. “Maturity is also a state of mind. We take great pride in looking at markets and customers we serve and ask, 'What else can we develop?' ”

He points to Momentive's StatSil high performance, silver-based antimicrobial silicone elastomer as an example of the firm's elastomer technology moving forward. The high consistency rubber and liquid silicone rubber custom compound products can be used in a variety of health care and consumer goods applications that benefit from built-in antimicrobial protection.

The StatSil platform brought Momentive two prestigious awards-the Frost & Sullivan Product Innovation of the Year Award and more recently the 2010 Ringier Technology Innovation Award.

Another breakthrough is a new technology that uses ultraviolet light instead of heat to cure rubber and LSR materials. Marketed under the Silopren and Addisil trade names, the firm said this allows for shorter cure times at low temperatures while maintaining the phy- sical properties of typical silicone rubber.

In addition, Momentive collaborated with Lee&Lee Hi-Tech Co.-an injection moulder of LSR-to develop light-emitting diodes lens parts for flat-panel, liquid crystal display televisions using Momentive's Silopren LSR 7000 series.

Momentive also just completed an effort to globalise its Silplus elastomer portfolio of HCR products so the materials are made uniformly throughout the world.

Modak said this shows the commitment the materials firm has to bolstering even the mainstay lines that customers still depend on.

“There will always be new needs and new customers,” he said. “We always want to help customers meet their needs and improve their profitability.”

Worldwide, the firm boasts 11 silicone elastomer manufacturing sites, including three in the U.S. It also remains proud of the legacy that began 70 years ago with the advent of the GE technology that allowed silicone to become a commercially usable material, Modak said.

“We feel very bullish about our future as an industry and as a company,” he said.

From Rubber & Plastics News (A Crain publication)