DuPont in Talks to Sell Textiles Unit

DuPont Co. DD.N , the second-largest U.S. chemicals company, on Monday said it was negotiating with an unnamed buyer for its DuPont Textiles & Interiors (DTI) unit which could fetch up to $6.5 billion, analysts have said.

DuPont, based in Wilmington, Delaware, said the talks are in the preliminary stage, and it could not guarantee that they would result in any transaction.

Media reports have pegged Koch Industries, a privately held producer of oil, gas and chemicals, as a likely buyer of the unit. A spokeswoman for the Wichita, Kansas-based company on Monday said Koch does not comment on rumors and speculation.

Analysts have said the unit could fetch a price of about $5 billion to $6.5 billion.

"The greater the interest, the greater the price," said David Kerans, an analyst at Argus Research, about the negotiations. He said the textile unit is the laggard of DuPont's businesses and that profits from it are going to be hard to come by because of tough competition from Asian competitors.

Koch is a logical buyer of DTI because it processes natural gas liquids, a basic ingredient for synthetic fibers, analysts have said. The purchase of DTI would make Koch more than a raw material supplier to the fiber industry -- it would give the company access to well-known brands under the names Lycra nylon and Stainmaster carpets.

DuPont was required to disclose the negotiations because of its ongoing efforts to purchase the remaining 24 percent stake it does not already own in its Canadian unit, DuPont Canada Inc., for $960 million (C$1.4 billion).

Should it acquire DuPont Canada outright, DuPont said previously it intended to roll the operation into its textiles unit. Company spokesman Irv Lipp said he could not comment on how the ongoing sale negotiations would affect that plan.

DuPont in February 2002 said it would explore all potential options for the textiles unit, including spinning it off or selling it to a third party. A flotation of the operation would create the world's largest independent integrated fibers company with annual sales of about $6.3 billion.

DuPont, which hired Morgan Stanley to serve as its financial adviser, originally hoped to complete a transaction by the end of 2003.

The chemical company launched a reorganization of the textiles unit early last year, which will result in about 2,000 employee positions being terminated by July 2003, according to DuPont's most recent annual report. The cuts will result in annual pretax savings of about $120 million, the company said.

The unit generated $6.28 billion in sales during 2002, down 3 percent from the year before. However, its after-tax operating income of $72 million reversed a year-ago loss of $340 million.

DuPont shares closed up 82 cents, or 2.1 percent, at $40.30 on the New York Stock Exchange. That is up from a 52-week low of $34.75 hit in early March but off a 52-week high of $48.30 hit last April.