Lyondell Petrochemical Co. said Thursday that it will buy Arco Chemical Co. for $5.6 billion, including the entire 82.2% ownership stake in the Newton Square, Pa., chemical company held by Atlantic Richfield Co.
The Los Angeles oil giant said in early June that it would reduce its holdings to 50% in Arco Chemical by selling stock to the public and to its former chemical subsidiary.
Arco is in the process of buying Union Texas Petroleum for $3.3 billion and is looking to sell assets to reduce debt, but it couldn't get a high enough price from any of several interested parties--including Lyondell--for all of Arco Chemical, said Mike Bowlin, Arco chairman and chief executive.
After its June announcement, Arco was approached again by Houston-based Lyondell, which said it wanted to buy all of the Arco Chemical stock, Bowlin said in an interview.
"It happened very quickly," Bowlin said.
Lyondell, a chemical and refining company, will pay $57.75 per share for Arco Chemical's 97 million shares outstanding. Lyondell will also assume about $870 million of Arco Chemical's debt.
The deal represents something of a family reunion for Arco Chemical and Lyondell, both former Arco subsidiaries. The two companies make similar petrochemical products, which are used in the manufacture of myriad items, from the foam in car seats to stain- and mildew-resistant carpets.
Arco said it will continue to examine assets that might be sold, including chemical and other operations acquired as part of its purchase of Union Texas, which specializes in overseas oil and gas exploration.
Arco intends to focus on its core businesses of oil and gas exploration and production, refining and marketing, Bowlin said.
The sale of Arco Chemical will bring Arco after-tax cash proceeds of about $3 billion.
Arco began unloading its chemical operations in 1987 when it sold part of Arco Chemical to the public. In 1989, it sold 50.1% of Lyondell to the public. It sold the rest of Lyondell last year.
Arco Chemical's shares jumped $6.50 to close at $57.06, and Lyondell added $1.25 to close at $29 per share. Arco's shares fell $1.63 to $78.81 in a tough trading day for energy issues.
All three companies' shares trade on the New York Stock Exchange.