DuPont Co., maker of nylon, Teflon, Lycra, Corian, and Stainmaster carpets, will buy Jackson-based ChemFirst in a $408 million, all-cash deal to acquire the largest merchant supplier of aniline in the U.S. and the only American producer of nitrotoluene derivatives.
Shareholders will receive $29.20 per share, priced higher than the company’s $22.80 closing price on the New York Stock Exchange last week.
“This is a fair price that reflects current conditions and discounts future growth and risk,” said Kelley Williams, chairman and chief executive officer of ChemFirst. “And the currency is cash — what you want at a time like this.”
“It’s not a distress sale, certainly,” said Dr. Walter Neely, professor in Else School of Management at Millsaps College. “It was actually a good deal for their shareholders.”
The sale will likely result in job cuts at ChemFirst’s Jackson office where the firm employs 50 administrative and sales workers. The 150 employees at the company’s chemical plant in Pascagoula should be safe, Williams said.
“Our headquarters personnel are highly qualified, competent, dedicated and loyal employees,” said Jim McArthur, secretary and manager for investor relations. “Most will be needed during the transition/integration of our personnel, accounting and information systems with DuPont. Some may be offered jobs with DuPont. However, we expect most will be phased out as the transition is completed.”
Severance and outplacement services should be provided, said McArthur, noting that affected employees will be in senior management and staff positions, including executive, legal,finance/accounting, tax, internal audit, human resources, information technology, investor relations and risk management.
ChemFirst was a portion of one of Mississippi’s oldest publicly traded companies — First Mississippi Corp.
Founded in 1957, that company focused mainly on fertilizers and other agricultural chemicals. Then during the 1980s, First Mississippi expanded into specialty chemicals, such as polyurethane and the chemical cleansers used to make computer chips.
First Mississippi merged its fertilizer and agricultural chemicals business with Yazoo City-based Mississippi Chemical in 1996. ChemFirst was created as part of the deal to handle First Mississippi’s specialty chemicals.
The past six years have seen ChemFirst simplifying what was left over from that transaction. Past selloffs left two divisions to ChemFirst — the polyurethane business and the electronic chemicals business
“This transaction originated as an unsolicited inquiry last fall,” said Williams. “We did not pick the timing. However, we knew from experience that there are only a few potential acquirers for our entire company because of our diverse businesses.”
The deal will require approval from regulatory agencies such as the Federal Trade Commission, the Department of Justice and their regulatory counterparts overseas, as well as the stockholders. A special stockholders’ meeting should be scheduled for late September or early October, said McArthur.The sale should be complete by the end of this year, Williams said.
Williams noted that even with the semiconductor industry in recession, ChemFirst has grown in the past quarters and is still a very lean company in terms of expenses. Second quarter earnings were $3.9 million, compared to a loss of $16.9 million for the same period last year. Sales for the quarter were $75 million, according to results released June 24.
“Our primary objective in acquiring ChemFirst is to strengthen DuPont’s electronic and communications technologies growth platform,” said Ann Gualtieri, vice president for investor relations at DuPont during an analysts conference call on July 24. ChemFirst’s products include essential materials to the semiconductor industry, as well as components that fit well with DuPont production of its next-generation polymers, said Gualtieri.
Mississippi business observers are adding ChemFirst to the list of Mississippi public companies undergoing change in the current economy.
“Anytime we lose a homegrown business, we lose that corporate identity, and we lose the tax base,” said Edwin Sallis, vice president of Morgan Keegan in Jackson. “You just lose part of yourself when that goes.”
Contact MBJ contributing writer at Julie Whitehead at firstname.lastname@example.org.