Big Merger in Chemical Sector

Lyondell Chemical ( LYO) agreed to acquire Millennium Chemicals ( MCH) for stock worth about $1 billion, creating the country's third-largest independent, publicly traded chemical company.

Lyondell will exchange between 0.95 and 1.05 of its shares for each of Millennium's roughly 64.6 million shares outstanding, according to a formula based on Lyondell's share price. The companies said the deal is worth $2.3 billion, including the assumption by Lyondell of about $1.3 billion in debt.

The combined company will retain the name Lyondell Chemical and would have had pro forma 2003 revenue of more than $11 billion. Its market capitalization will be around $4 billion immediately following the transaction, which is expected to add to Lyondell's earnings in 2005.

Lyondell and Millennium currently operate a joint venture, Equistar, that produces ethylene, propylene, and other gasses. The companies hope the merger will simplify their financial disclosures.

Lyondell was recently up 5 cents, or 0.3%, to $15.67, while Millennium $2.95, or 23%, to $15.50.

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