Dover Clinches Chlorinated Paraffin Deal


Dover Chemical Corp. has agreed to buy the chlorinated paraffins business of Pioneer Companies Inc., a deal that gives Dover a monopoly on chlorinated paraffin production in North America.

A Houston-based supplier of chlorine and related products, Pioneer makes chlorinated paraffins at a plant in Cornwall, Ontario, Canada. In announcing their agreement Monday and Friday, respectively, Dover and Pioneer indicated that the Cornwall plant will be closed and that Dover plans to supply its new customers from existing facilities in Dover, Ohio, and Hammond, Ind. Pioneer said it reached a separate agreement to supply chlorine to Dover.

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The companies did not disclose additional details of their agreements and Dover officials could not be reached for comment yesterday.

Chlorinated paraffin buyers in the lubricants industry expressed concerns about the transactions implications. A spokesman for the Independent Lubricant Manufacturers Association said the group has been contacted by as many as 10 member companies.

The comments have generally been that they feel there will no longer be any effective price competition, ILMA General Counsel Jeffrey L. Leiter told Lube Report yesterday. They say that having one real source of supply is problematic.

Among other applications, chlorinated paraffins are used in cutting fluids to provide extreme pressure protection. Dover was already the continents dominant producer, especially after the 2003 acquisition of its biggest competitor in that market, Ferro Corp.s Keil Chemical Division. At the time, observers said the deal gave Dover approximately 75 percent of chlorinated paraffin capacity in North America.

Pioneer had little if any sales to the lubricants industry in 2003 – instead selling most of its chlorinated paraffins to the rubber, plastics and paints industries – but it claims to have since made significant inroads into lubes. In addition, U.K.-based Ineos Chlor has expanded its profile with European exports to the United States.

Metalworking fluid suppliers expressed trepidation in response to the news that supply will now concentrate further.

Im always disappointed when competition decreases, said Eric Kielts, vice president of laboratory services for Wallover Oil Co., a lube blender in Strongsville, Ohio. Up to this time, Dover has acted in a very responsible way with its acquisition of Keil. I would hope that they continue to operate in the same manner after this transaction.

U.S. law requires companies making acquisitions of more than $50 million to file notice beforehand with the Federal Trade Commission so that it may consider potential impacts on free trade. The law does not prohibit the commission from studying smaller deals in cases where it decides that attention is warranted. Observers speculated that Dovers acquisition may not have reached the threshold to require prior notice.

Leiter said ILMA has not yet decided whether to react to Dovers acquisition, but that it will consider the matter.

At this point, we dont have any direction from the board about whether to express [member] concerns to the [U.S. Federal] Trade Commission or the Justice Department, he said. But were in a position to put the question to ILMA leadership now that the deal has been reached.

The Cornwall plant employs between 20 and 30 people.

Dover is a subsidiary of chemical maker ICC Industries Inc. and is based in Dover,Ohio. It supplies the lubricants and other industries with a variety of chemical additives, including chlorinated and brominated compounds, metallic stearates and specialty alkyl phenols.

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