Market Reacts to Dover-Keil Takeover


Dover Chemical Corp. says its newly swelled share of the chlorinated paraffin market shouldnt be too big for antitrust regulators. But Pioneer Companies says Dovers dominance should make Pioneer more popular with metalworking fluid blenders.

Dovers president said last week that it expects no objections from the U.S. Federal Trade Commission over its acquisition of Ferro Corp.s Keil Chemical Division, which combined the two largest North American producers of chlorinated paraffins.

Pioneer, the continents only othersignificant supplier, predicts that blender concern about Dovers position will drive them to seek a second source for chlorinated paraffins. Pioneer aims to fill that role.

We see this acquisition by Dover as an opportunity, Specialties Business Manager Michel Crete said. Anytime a supplier gains that much market share, customers become uncomfortable. They are going to be looking for another supplier so they dont have all of their eggs in one basket. And we are the only other local producer.

Dover and Keil ranked first and second in chlorinated paraffin production, according to industry sources, with market shares of 50-55 percent and 20-25 percent, respectively. Houston-based Pioneer produces practically all of the rest at its plant in Cornwall, Ontario. Dover, which is based in Dover, Ohio, now claims an even bigger share of the metalworking fluids market, since Pioneer sells primarily into the plastics market.

(According to the Chlorinated Paraffin Industry Association, half of the material produced in North America goes to the lubricant industry, where it is used primarily to provide extreme pressure protection inmetalworking fluids. Approximately one fifth of production goes to the plastics industry for use in polyvinyl chloride.)

Dover President Dwain S. Colvin said last week that Dover and Ferro never even considered FTC objections while working out their deal.

I just dont think its an issue, he said. Theres plenty of competition in the market, and well treat our position responsibly. Besides Pioneer, Ineos Chlor and Ideas Inc. also participate in the market with imported products.

U.S. law requires merging companies to notify the Federal Trade Commission of deals valued at $50 million or more. An FTC spokesman noted that the commission may review cases falling below that threshold if it determines that they would harm competition. Dover and Ferro did not disclose the price of the Keil transaction.

The Independent Lubricant Manufacturers Association has predicted, though, that Dovers acquisition will not merit regulatory scrutiny. ILMAs weekly online newsletter, Flashpoint, reported yesterday that association counsel Jeffrey L. Leiter advised that the case will probably not be reviewed. Lube Report could not reach him for comment.

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