Trona on the Web: Plant Sold in 1997
Chemical Company in Trona Sold
By KAREN BOTHAM
Californian correspondent
(Publication date: 12/17/97)
TRONA — North American Chemical Co., the only major employer in this tiny desert community, has changed hands in a $450 million deal involving several companies. The company was sold to New York-based chemical manufacturer IMC Global Inc. as part of a sale in which IMC took over New York-based Harris Chemical Group Inc. IMC Global is one of the world’s leading producers and marketers of phosphate and potash crop nutrients and animal feed ingredients. Its annual revenues last year were nearly $3 billion. Harris, which produces and markets inorganic chemicals, has annual sales of about $850 million. “This acquisition is consistent with IMC Global’s growth objectives and builds on our core competencies in mining, chemical processing and international distribution logistics and marketing,” said Robert E. Fowler Jr., president and chief.
SALE: Deal to be completed in first quarter of 1998 executive officer of IMC. “In our existing businesses, we have demonstrated an ability to achieve low-cost positions. The rapid integration of HCG’s operations will allow us to take swift action to reduce consolidated debts.” The deal is expected to be finalized during the first quarter of 1998.
North American Chemical Co. mines soda ash, sodium sulfate and boron from Searles Lake near Trona, a community of 3,500 just 25 miles east of Ridgecrest. The plant produces 1.75 million tons of products annually. The mined minerals are used in the production of glass and chemicals. Although there’s been no word on any personnel changes, the 714 employees are taking the sale in stride, according to Arzel Hale, director of administration for NACC. A majority of them live in Ridgecrest. “We haven't been told anything out here about that. It’s just hard to say at this point,” Hale said about any possible reorganization. “Our employees are taking this sale well.” It was just seven years ago that D. George Harris and Associates bought the Searles Valley operation from Kerr McGee Corp., which began its operations in 1967.
The original plant was built in 1916. In 1993 three North American businesses were consolidated to form Harris Chemical Group. IMC Global Inc. has agreed to pay $450 million in cash for all the equity in the Harris Chemical Group. In addition to NACC, the group includes North American Salt Co., Great Salt Lake Minerals and the European companies of Salt Union Limited, Harris Soda Products Europe, Matthes & Weber and Societa Chimica Larderello. IMC also intends to purchase Harris’s Australian affiliate, Penrice Soda Products Pty. Ltd. Two other Harris affiliates, Harris Specialty Chemical and U.S. Silica Co., are not part of the transaction.
IMC Global will assume about $950 million of debt in the purchase. Fowler said he’s identified several major cost-reduction opportunities in distribution logistics, procurement and operations. “Cost-reduction initiatives are expected to achieve savings of approximately $50 million on an annualized basis by the year 2000. By that year, the acquisition should add 45 to 50 cents to earnings per share,” Fowler said. IMC expects to see a 30 to 35 cents per share increase by 1999.
Harris began receiving inquiries about the possible sale of his chemical group six months ago. Initially he discounted any opportunity to sell, but after being approached by several other investors decided he owed it to his stockholders to look seriously at the option, according to Chris Pagano, spokesperson for Harris Chemical. “We feel that IMC is an outstanding company, and we look forward to working with them,” Hale said. Harris said, “We believe that the operations and businesses of HCG and IMC Global constitute an excellent fit yielding significant synergies, and that we have found a new environment in which our management and employees will thrive and prosper.”