Dover Bids for Pioneer Plant


Dover Chemical Corp. has offered to buy the Pioneer Companies chlorinated paraffins plant in Cornwall, Ontario, according to plant employees. If completed, a deal would give Dover a monopoly on chlorinated paraffin production in North America.

Two union employees told Lube Report Monday that Pierre Ducharme, manager of Pioneers chlorine plant in Becancour, Quebec, visited the Cornwall plant April 12 and informed employees that Dover had offered to buy the facility and that Pioneer had made a counter-offer.

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He said there was about a 90 percent chance that the plant would be sold, said one employee, who spoke on condition of anonymity. Cornwall Plant Manager Ron Thompson confirmed that Ducharme made such statements, but Pioneer and Dover management declined to comment.

Dover is already the continents dominant supplier of chlorinated paraffins, chemicals used in cutting fluids to provide extreme pressure protection. Dover makes the material at plants in Dover, Ohio, and in Hammond, Ind.

A subsidiary of ICC Industries, Dover acquired the Hammond plant in mid-2003 when it bought its biggest competitor in that market, Ferro Corp.s Keil Chemical Division. At that time, observers said the acquisition gave Dover approximately 75 percent of chlorinated paraffin capacity in North America – and nearly all of the production that was going into the lubricants market.

Two years ago Pioneer sold mainly to the rubber, plastics and paints industries. It subsequently made inroads into the lubricants market, which now accounts for a significant portion of its business, according to the union employees. But Pioneers management – creditors who have run the business since a bankruptcy reorganization in 2001 – stated last year that they wanted to sell the plant. The facility employs 28 people and has capacity to make 10,000 metric tons per year.

The union employees said Ducharme gave the impression that Dover wants to close the Cornwall plant.

He never came out and said that, but he gave no indication that Dover is interested in running the plant, said the other employee, who also asked not to be identified. He talked about Dover wanting to acquire our customers. He also said that Dovers CP business is now operating at about 65 percent of capacity, but that this acquisition could bring its plants to 100 percent.

The employees said they were told that Dover, as part of the proposed transaction, also wants to enter an agreement to buy chlorine from Pioneer. Dover does not currently own any chlorine supply. Chlorine prices have risen to unprecedented levels over the past year.

The Pioneer employees said they have heard no further word about a sale, although they added that Dover employees visited the plant to inspect equipment shortly after Ducharmes statements.

It is not clear whether a deal between Dover and Pioneer would attract attention of antitrust regulators, even if it created a monopoly. In the United States, the Federal Trade Commission is charged with ensuring that markets remain competitive. Companies involved in mergers are not required to notify the commission if their transactions are valued less than $50 million, but the agency may review cases falling below that threshold if it determines that they would harm competition.

If a deal were completed, Dover still would not be the markets only supplier of chlorinated paraffins. Ineos Chlor and Ideas Inc. import product from Europe. Still, at least some cutting fluid blenders say they would hate to lose another North American producer.

From a procurement perspective, you sure like having that ace in the hole, said Catherine C. Novak, metalworking fluids product manager for Eastern Oil Co. of Pontiac, Mich. When you start narrowing down the number of additive suppliers, it reduces your bargaining power as buyers.

Pioneer is a Houston-based supplier of chlorine and related products. It operates four chlor alkalai plants and several downstream facilities in North America. It recorded revenues of $407 million in 2004.

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