News of the Week

stock back. The plan worked. The two companies have agreed that Dome will sell back its Conoco shares to Conoco in return for Conoco's interest in Hudson's Bay. As part of the terms, Dome also will pay Conoco $245 mil­lion in cash.

Conoco says it will retire the shares it will receive, giving itself an auto­matic earnings increase estimated at 18% based on the first quarter of 1981. Conoco says it will put the cash to work in capital spending projects.

Indirectly, Dome's bold move is also a victory for the Canadian gov­ernment's Canadianization program in the country's oil and gas industry. Conoco claims that the government's new incentives favoring Canadian ownership of oil and gas interests encouraged a relatively low bid on Conoco's Canadian property.

Hudson's Bay will not be much of a loss for Conoco's after-tax earnings, to which it contributed only 6% in 1980. But the essentially forced sale will take away one of Conoco's better properties for future return and will set a precedent for other takeovers of U.S. energy interests in Canada. Cities Service currently is fighting one of these (see page 9). G

Chemical business slow but not slumping Chemical business in the U.S. is somewhat sluggish these days. And it isn't likely to get much better for the rest of the year. However, chemical makers won't suffer a repeat of the precipitous slump in U.S. demand that hit them in April 1980 and lasted for several months.

This is the consensus of chemical executives at a press conference held last week at the annual meeting of the Chemical Manufacturers Association in White Sulphur Springs, W.Va.

There is also agreement that chemical business was a little better than expected in the first quarter and at least the sluggishness is at a fairly decent level of production. As Louis Fernandez, newly elected vice chair­man of the CMA board and vice chairman of Monsanto, puts it, "Business is acceptable but not ebullient." However, Europe is an­other case. There chemical business is horrible and there are no indica­tions of when any upturn may start. For U.S. firms, chemical activity in other overseas areas apparently is holding up quite well and is showing particular strength in Latin America.

William G. Simeral, a Du Pont se­nior vice president and the new chairman of CMA's executive com­mittee, says his company expects its U.S. business to be flat for the next two quarters. The company has hopes, apparently not particularly well founded, for a pickup in the fourth quarter.

Fibers are helping Du Pont in the U.S., hurting it in Europe. In the U.S. they have been outperforming chemicals overall for the past three quarters. But the fiber business re­mains very poor in Europe.

The Du Pont executive says the U.S. is going through a period of trying to get its financial house in order. Until that is done and inflation contained, the auto and housing markets will remain slow—with ob­vious effects on Du Pont and other chemical makers.

Paul F. Oreffice, president and chief executive of Dow Chemical and the new CMA chairman, says that the level of activity for Dow in the U.S. is higher than planned. But in his opinion, "the economy could stay mushy throughout 1981." Europe, he says, is a "bit of a disaster." Some­what like the U.S. situation, volume levels are not the problem; he de­scribes them as "not that bad." The difficulty is a tremendous cost-price squeeze between feedstocks bought with relatively strong U.S. dollars and product sold in local currencies.

On a more positive note, Oreffice predicts that interest rates in the U.S. will "really tumble" once they do start to fall. What is needed to trigger such a decline is a general perception that the Reagan Administration's eco­nomic program is beginning to work and bring inflation under control.

Simeral: period of financial reordering

Such a decline in interest rates, which should trigger a general economic resurgence, could start as soon as late this year.

H. Barclay Morley, chairman and chief executive officer of Stauffer Chemical, who was succeeded by Oreffice as CMA chairman, says that its U.S. business had been "ho hum" in terms of volume since last fall. He points out that for the first time in many years the company has not been able to keep to its budget for price increases. However, somewhat off­setting this, raw material prices have not gone up so much as expected. D

Occidental to acquire meat processor Occidental Petroleum has agreed in principle to acquire Iowa Beef Pro­cessors, one of the largest U.S. beef and beef products processing firms in the U.S., for a combination of stock.

For its fiscal year ending Nov. 1, 1980, Iowa Beef had earnings of $53 million on sales of $4.6 billion.

The terms of the proposed merger call for Occidental to give Iowa Beef stockholders 1.328 shares of new Oc­cidental common stock and 0.385 share of a new series of Occidental nonconvertible preferred stock for each share of Iowa Beef common stock outstanding. The new Occi­dental preferred issue will have a liquidation value of $100 per share and an annual dividend of $14 per share.

Based on the closing price of Occi­dental common stock ($29 per share) on Friday, May 29, the combined value of the Occidental securities would be about $77 per share of Iowa Beef common stock. This would give the deal a total value of about $809 million. Iowa Beef common stock closed at $58.59 per share on May 29. Thus, the deal is worth about 30% more than the preagreement stock price for Iowa Beef.

Occidental says that David H. Murdock, chairman and chief exec­utive officer of Pacific Holding Corp., which holds about 19% of the Iowa Beef common stock, has stated that he will vote in favor of the proposed merger.

The acquisition of Iowa Beef rep­resents a departure in strategy for Occidental, which until now has been resource oriented. However, some sources believe Occidental is posi­tioning itself for what it sees as a scarcity of food developing in the 1990's. D

8 C&EN June8, 1981