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DuPont Is in Talks to Sell Unit to Koch

August 12, 2003|From Reuters

Chemical company DuPont Co. said Monday that it was in talks to sell its textiles and interiors unit, known for the Lycra sportswear and apparel fabric, to privately owned Koch Industries Inc.

Analysts have valued the unit at about $5 billion.

The sale is part of DuPont's reorganization plans, which it launched early last year. The company is in the process of eliminating 2,000 jobs and trying to achieve annual cost savings of about $120 million.

Koch was considered the logical buyer for the unit because it processed natural gas liquids, a basic ingredient for synthetic fibers. If the purchase occurs, the Wichita, Kan., company not only would be a raw material supplier to the fiber industry but also the holder of well-known brands such as Lycra and Stainmaster carpets.

The unit generated sales of $6.28 billion during 2002, down 3% from the previous year. However, it reported post-tax operating income of $72 million, reversing a 2001 loss of $340 million.

DuPont did not say how long the talks would continue but said Koch executives would visit the unit's plants to do due diligence.

A source familiar with the talks between DuPont and Koch said both parties have been in serious discussions for about three months and DuPont is more in favor of a sale than an IPO. The source also said both parties were looking at a potential price tag of $5 billion, subject to completion of due diligence.

Most industry analysts have welcomed DuPont's decision to get rid of its textiles and interiors unit, saying the sale would transform DuPont from a company exposed to many cyclical businesses to a leaner, high-growth scientific company.

DuPont's shares rose 27 cents to $43.23 on the New York Stock Exchange.

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