This is an older article but really good. Talks about the ceo and his vision for Chemtura as well as an asset sale.
Chemtura's new CEO Craig Rogerson aims to turn around the struggling specialty chemical firm
Hat trick
24 February 2009 20:54 [Source: ICB]
Chemtura's new CEO Craig Rogerson comes to the rescue from Hercules where he sold at the perfect time. Can he pull another rabbit out of the hat?
DETERIORATING PROFITS, an upcoming debt maturity and a stock price in a downward death spiral - it's a turnaround situation if there ever was one. Beleaguered US specialty chemical firm Chemtura desperately needs a savior. And new chairman, president and chief executive Craig Rogerson could well fit the bill.
Taking the helm on December 8, 2008, Rogerson has his work cut out for him. He comes from a successful stint at US specialty chemical firm Hercules, where he was CEO for almost five years from December 2003 to the sale of the company to Ashland in November 2008.
Prior to being named CEO of Hercules, he served as general manager of BetzDearborn, the Hercules business that was sold to General Electric in 2002 to reduce debt.
"That experience showed me that you can sell a good business, deal with the issues, and then grow the company again. That's what we did at Hercules and I've seen nothing that gives me any doubt that the same thing can happen here," said Rogerson in an interview with ICIS at Chemtura headquarters in Middlebury, Connecticut, US.
Around the corner is a huge hurdle for Chemtura. The company has $374m in debt maturing on July 15 and has been hit with investor concerns about bankruptcy.
Rogerson is aiming to announce a major asset sale by the end of March that could bring in around $700m (€552m) in gross proceeds.
"By the end of the first quarter I would hope to be able to announce a sale. I'm optimistic as things are progressing as expected," says Rogerson.
"We'd like to net about $500m to pay down the $374m in debt, and have extra cash to deal with liquidity issues," says Rogerson.
"That $700m-$1bn range for the gross proceeds [of an asset sale] is probably not way off," he adds, referring to an ICIS report that proceeds from the sale of Chemtura's crop protection business could fetch that amount.
MULTIPLE DIVESTITURE PATHS
The company is in the process of selling multiple businesses to ensure it can pay down that debt on time and that it gets fair value for its assets.
"We have multiple players involved in multiple asset divestment paths. We've had some very rigorous screening of potential buyers to make sure they have the cash or firm financing to close the deal," says Rogerson. "Also, there is a risk that people could take advantage of our situation. So we must make sure we have multiple choices, so that there is competition in this process."
While Rogerson would not name the assets for sale, Chemtura's crop protection and petroleum additives businesses are on the selling block, according to sources in the financial community.
Signs point to a sale of the crop protection business, as it is a high quality asset that could bring in significant proceeds - between $700m-$1bn, according to sources.
"For us to get the kind of proceeds we're talking about, we have to sell a good business - not one that we would typically want to sell, but one that has value," he added.
Through the first three quarters of 2008, Chemtura's crop protection chemical segment posted a 12% gain in sales to $394m.
CREDIT RATING DOWNGRADES
Chemtura has faced recent downgrades from global credit ratings agencies Standard & Poor's (S&P) and Moody's Investors Service.
On January 22, S&P cut its rating on Chemtura by three notches from "B" to "CCC" with a negative outlook.
"Default risk is high, given the constraints on borrowing capacity and the tight timeline to complete a potential divestiture ahead of the debt maturity," said S&P.
Moody's followed on February 5 with a one-notch downgrade from "B2" to "B3" (this is equivalent to S&P's B-).
Chemtura's stock price has fallen from a 52-week high of $8.81 back in June 2008, to around 65 cents. The company's market capitalization stands at under $160m.
"The share price is not a reflection of the value of the business, but rather of whether or not we are going to be able to meet this debt obligation in July," he adds.
Chemtura is not currently pursuing a Chapter 11 bankruptcy option, according to Rogerson. That would be the last option on the table.
However, in the absence of an asset sale, the company could look for an equity infusion, although this would be highly dilutive given Chemtura's diminished stock price.
"We've had inquiries on this front and right now we're just listening," says Rogerson. "But I'm optimistic and fully expect us to use funds from an asset sale to be able to pay off these bonds due in July."
Chemtura's situation is analogous to that of Hercules back in 2001-2002 when it needed to sell off BetzDearborn to reduce its heavy debt load.
"However, it is a little different because we are not nearly as highly leveraged as Hercules was - our balance sheet is much stronger than that of Hercules in 2001," notes Rogerson.
"Unfortunately, the economy and financial markets are much different. The access to capital now is the issue - there is no access, especially for those with weak credit ratings."
REBUILDING A SOLID FOUNDATION
In the meantime, Chemtura is undergoing a major restructuring to slash costs, preserve cash and build a solid foundation for future growth.
On December 11, 2008, the company announced the elimination of 500 professional and administrative staff, or 20% of these positions. The move, to be completed by the end of the first quarter of 2009, will save around $50m in annual costs.
Then on January 19, Chemtura announced the realignment of its businesses into two groups - Performance Products and Engineered Products.
"We continue to reposition the businesses and put a foundation in place so that once we get out of this liquidity crunch, we can deliver growth," says Rogerson. "Our organizational restructuring is really aimed at putting us in the best position to win in each of those eight businesses. People in charge of those businesses will have true P&L [profit and loss] responsibility, accountability and the authority and knobs to turn to be able to deliver."
The performance products group, led by group president David Dickey, includes consumer products, petroleum additives, urethanes, and the antioxidant/ultraviolet plastic additives businesses.
Engineered products, which will be led by Rogerson for the time being, consists of flame retardants, crop protection, organometallics, and the PVC/surfactants businesses.
"We have the full bell curve of businesses - some good, and some bad, and some with better opportunities than others," notes Rogerson. "But even if we sell one of these businesses, we'll still have over $3bn in revenues versus about $1.6bn at Hercules when we sold BetzDearborn."
Chemtura generated sales of $3.55bn in 2008.
Businesses with good growth opportunities include flame retardants, urethanes, petroleum additives and consumer products, according to the CEO.
"The reason the board brought me on was to grow this company," says Rogerson. "We have things we need to fix first, but then the exciting part will be growing the business - growing through M&A. That is the goal - to use Chemtura as a foundation for growth. We have the systems and the talent to do that."
As hard as it may be to imagine Chemtura on the acquisition trail again anytime soon, Rogerson does not rule out even big deals, encompassing joint ventures or stock swaps.
"There is an opportunity in times like these, when companies are in similar situations, to do bigger deals," he says. "There is a sense of urgency out there, and synergies are more valuable than they've ever been."
Going forward, Rogerson seeks to galvanize management and employees to work as one company, rather than as parts of divisions.
"I don't think anyone could argue that Chemtura did a good job of integrating companies - Uniroyal, Witco, Crompton, Great Lakes Chemical and BioLab. If there is an advantage of going through the crucible like we are now, it's that people are clearly unified," says Rogerson.
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