Lyondell Chemical — Millennium Chemicals — Merger or Acquisition (March 2004)
27 slides from Lyondell Chemical's merger presentation, Mar 30, 2004
Slide 1: Lyondell and Millennium
Lyondell andMarch 29, Dan F. Smith Lyondell President and Robert E. Lee Millennium President
Slide 2: Forward-looking statements
This presentation ard-looking contains ements within stat forw e meaning of the th ritiesPrivate Act of 1995. Such statements statements about include, buthe proposed transactionen are thenot benefits limited of Lyondell Chemical “Lyondell “) and Millennium Chemicals Company ( “Millennium Inc. “), i
Slide 3: Transaction Summary
Transaction Summary Transaction Structure —Stock-for—-Exchange ratio of 0. —Ratio varies based —0.95 at $20.50 —1.05 at $16.50 —Use 20-day —Linear Transaction Size on including- $2.3 B transacti $ ium1.3 B Equity Issuance —61.8 68.3 MM —Cash dividend Governance / Management o independent Millenniume
Slide 4: Exchange Ratio Is Calculated As Follows
Exchange Ratio Is Calculated As Follows: Exchange Ratio = 1.05—[((LYO Avg. Price – 16.50) / 4) X 0.1] Lyondell Share Price
Slide 5: The Debt Structure Remains
The Debt Structure Remains Consolidated Financial ??Legal Structure • Millennium and Equistar become Lyondell • Equistar ownership remains 70.5% ??Debt Structure • Debt structure at each entity • No change to bond um convertible and Millenni • Convertible becomes ible into Lyondellconvert • Millenni
Slide 6: Strategic Benefits Of The Transaction
Strategic Benefits Of ?Consolidated ownership of Equistar ?Forms the third largest independent publicly traded chemical company in North America ?Cost savings and synergies provide value to the combined shareholders ?Adds breadth / depth to the portfolio • Market leadership positions • Broader geogr
Slide 7: Lyondell Overview
Overview (2003 Sales millions) Lyondell Sales: $3,801 Sales: $6,545 Sales: $4,162 100% 70.5% 58.75% IC&D Equistar LCR • Global leader in the manufacture and marketing of intermediate and performance chemicals • Products: - Propylene Oxide - Propylene Glycol - Propylene Glycol Ethers - Butanediol - T
Slide 8: Millennium Overview
Overview (2003 Sales millions) Millennium 100% Sales: $ 29.5% Sales: Equistar Sales: $ Sales: Sales: TiO2 Acetyls Specialty Chemicals Second gestlar in the world Largest of titanium N. America Other zircon, and cadmium pigments Second producer acetate tetrachloride (VAM) and in NorthEurope Producesi
Slide 9: Consolidated Lyondell
Consolidated Lyondell Acetyls 4% TiO2 10% Spec 1% IC&D 33% Equistar 52% Consolidated 2003 Sales 1 1Excludes’s 58.75% Lyondell tionate share propor of LCR ‘s sales of $4.1B.
Slide 10: 3rd Largest Chemical Company
3rdLargest Chemical 2003 Sales ($ in millions) $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 ARJ L M W ALB SHLM F UL K G L CYT FOE H MC C H P L PO LZ C K RPM L VA EC ECL LYO X N C SHW EMN H R O G PPLyondell ma F or Pro DD DOW
Slide 11: Lyondell Continues To Grow
Lyondell Continues To Lyondell Growth & International Presence IC&D — A leading global producer of PO and derivatives — Process technology strength International Presence and Steady Performance Millennium — Leading product positions in TiO2 and Acetyls — Ethylene integration Cash Generation LCR — Un
Slide 12: Leading Product Positions and Leverage
Leading Product eatePositions Leverage Pre-Tax Leverage Product Annual Capacity Capacity Position (1) ( 1¢/unit) Propylene Oxide (lbs) (2) 4.5 billion 1st in North America $ 23MM Intermediate 1st in the world Styrene Monomer (lbs) 5.0 billion 1st in North America $ 21MM Chemicals and 4th in the worl
Slide 13: This Transaction Maintains Diversifying Total Chemical
This Transaction Maintains Diversifying Total Chemical Pounds / Share Pre-close Post close Lyondell Millennium Lyondell Base Chemicals Ethylene 46.5 52.5 47.5 Styrene 16.5 — 12 Propylene Oxide 13.5 — 10 TDI 3 — 2.5 Acetic Acid — 18.5 5 TiO2 — 23 6 79.5 94 83 Derivatives Polyolefins 24 27 24.5 Ethyle
Slide 14: Enterprise Earnings Cycle Trough Results
Enterprise Earnings Trough Results Cycle EBITDA Potential 3500 3000 2500 MM 2000 $ 1500 1000 500 0 Trough Pre 2 1 1 LYO 2003 MCH 1999/2000 1995 Margins Margins LCR IC&D EQU MCH 1Chem Data/CMAI y margins conditions industr rproducts (ex.for IC&D and current capacities , LCR 2003 EBITDA. and ownership
Slide 15: A Major Chemical Company
A Major Chemical England Belgium Ohio Pennsylvania Korea France Iowa/Illinois Maryland Japan Gulf Coast China Georgia/Florida Hong Singapore Brazil 37 plants 4 continents Sales and distributionin over 90 countries Over 25% ofidated sales 2003 consol of theoutside s ~50% excluding Equistar
Slide 16: Our Best Practices
Our Best Practices Led ToApproach Has Lyondell Safety Safety 2 Recordable 1.5 1 0.5 0 2 Recordable 00 1.5 1 0.5 1st Quartile ‘02 1999 2000 2001 2002 2003 Average SG&A and 2002 1999 2000 2001 2002 2003 1st Quartile ‘02 1 0.46 0.52 Days % Sales of Days Lyondell Equistar 14.0% 12.0% 10.0% 8.0% 6.0% SG&
Slide 17: The Combined Entity Of Four Companies
The Combined Entity Of Four Companies LYO EQU LCR MCH1 Sales, $MM 3,801 6,545 4,162 1,687 EBITDA, $MM 245 175 377 183 Total Assets, $MM 7,633 5,028 1,637 2,398 Employees 3,350 3,165 920 3,600 * All Data ecember 31, 2003 as of D 1EBITDA before $103 t charge,MM impairmen $18 MM d$closure 5 MM
Slide 18: The Combined Entity Liquidity
The Combined Entity 12/31/2003 Lyondell LCR Equistar MCH Cash $438MM $199MM$ 43MM $ Facility Availability $300MM $430MM$ 57MM $ Total Liquidity $738MM $629MM$100MM $
Slide 19: Benefits To The Millennium Shareholder
Benefits To The Millenium Shareholder ??Become part of broader more diversified chemical company ??Market capitalization is nearly 5 times larger than stand alone ??Retain leverage to the ethylene cycle ??Simplified ownership, benefits all shareholders ??Combined entity includes multiple stable cash
Slide 20: Current Operating Plans
Current Operating Plans • Houston Headquarters • Business line management • TiO2 – remains a stand-alone business • Acetyls – operate with IC&D/Equistar • Fragrance & Flavors – remains a stand-alone business • IC&D, Equistar and LCR are unchanged
Slide 21: Transaction Synergies
Transaction Synergies ?Anticipated synergies: Greater than $50 MM ?Eliminate redundant service providers and systems ?Single management team ?Site consolidation ?Operational Excellence impacts ?Best practices ?Support services
Slide 22: Next Steps
Next Steps ?SEC filing – April ?Face-to-face investor – April ?Close transaction – Third Quarter
Slide 23: A Compelling Combination
A Compelling Combination ?A major global chemical company ?Positive financial impact both near and long-term ?Preserves and enhances petrochemical upside ?100% ownership of Equistar ?Broadens and strengthens the portfolio ?Simplifies Lyondell – accounting consolidation
Slide 24: Reconciliation of Net Income (Loss) to EBITDA
Reconciliation of Net Income (Loss) to EBITDA For the Year Ended December 31, 2003 (Millions of dollars) Lyondell net loss$(302) Add: Benefit from income tax (179) Interest expense, net 392 Depreciation and amortization 250 Loss from equity investment in Equistar 228 Income from equity investment in
Slide 25: Reconciliation of Net Loss to EBITDA
Reconciliation of Net Loss to EBITDA For the Year Ended December 31, 2003 (Millions of dollars) Millennium net loss $ (184) Add: Cumulative effect of accounting change 1 Benefit from income tax (65) Interest expense, net 92 Depreciation and amortization 113 Loss from equity investment in Equistar 10
Slide 26: Sales and Other Operating Revenues Reconciliation
Sales and Other Operating Revenues Reconciliation for the Year Ended December 31, 2003 (Millions of dollars) Ownership Proportionate 100% Interest Share Sales and other operating revenues Lyondell $ 3,801 100.00% $ 3,801 Equistar 6,545 70.50% 4,614 LCR 4,162 58.75% 2,445 Lyondell and Proportionate S
Slide 27: Days of Working Capital Reconciliation
Days of Working Capital Reconciliation Dollars in Millions Dec. 31, 1998 * Dec. 31, 2003 Lyondell Equistar Lyondell Equistar Working Capital: (a) Accounts receivable (b) $ 479 $ 522 $ 449 $ 608 Inventories 550 549 347 408 Accounts payable (310) (337) (431) (513) Total 719 734 365 503 Add: Accounts r
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