Wilmington, DE, May 8--DuPont Co. plans to sell its unit that makes well-known Lycra fiber and other textiles within a month to private firm Koch Industries Inc. for more than $5 billion, according to sources familiar with the deal.
DuPont, said last year it planned to shed the division, known as DuPont Textiles & Interiors (DTI) by the end of 2003. It has considered either selling it off or offering shares to the public and current shareholders.
Although talks between DuPont and Koch, a refiner and commodity trader, have been going on for a while, they could still fall through in the last minute, the sources said this week. It is not unusual for transactions such as this that require hefty bank financing to fall apart or be delayed.
DuPont and Koch, based in Witchita, Kansas, declined comment.
The company appeared to maintain the option of a spinoff by naming DuPont executives to head up DTI last week.
A sluggish textile industry and weak market for initial public offerings have left investors and analysts favoring a sale rather than spinoff.
DuPont has wanted to separate DTI because of high raw material costs for making fibers and cheap textile imports from Asia. While DTI posted revenue of more than $6 million last year -- a quarter of DuPont's annual sales -- it earned $72 million, making it the company's least profitable division.
DuPont has cut jobs and shuttered plants at DTI over the past two years and expects much better growth from making chemicals used in crop protection, food additives and electronic displays.
Koch, the second-biggest privately held company in North America and one of the world's biggest polyester makers, is on a growth kick. It recently bought a fertilizer business for about $293 million and has made a series of smaller purchases.
For Koch, a DTI acquisition would expand its polyester business and dwarf any purchase in the past decade. The deal also fits well with its energy operations, which can supply the natural gas or oil needed to make synthetic fibers like nylon and Lycra.
More than half of DTI's sales come from nylon, invented by DuPont in the 1930s and used in carpets and clothes. The rest comes from the clothing fiber Lycra, polyester, and chemicals sold to other fiber makers.
