Tuesday PM July 17th, 2007

Basell purchasing Lyondell Chemical in deal worth $19 billion...Plains Exploration and Production buying Pogo Producing Company in 3.6 billion deal...Southwest Airlines offers buyout package for more than a quarter of its employees...

Less than a week after being outbid on a similar deal, Dutch chemicals company Basell says it'll buy Houston-based Lyondell Chemical for $12.1 billion in cash. That'll create a global powerhouse and dwarfing Basell's recently failed offer for Huntsman. Basell said it would pay $48 per share in cash for Lyondell--a 20 percent premium to Lyondell's closing share price Monday. The two companies peg the total value of the deal--including debt--at $19 billion. Just last week, Basell walked away from a $5.6 billion deal to buy chemicals maker Huntsman Corporation. That's after being outbid at the last minute by private equity firm Apollo Management. The combined Lyondell-Basell would have annual revenue of more than $34 billion and more than 15,000 employees worldwide. The deal was unanimously approved by the boards of both companies. Basell is owned by Russian-American industrialist Len Blavatnik's U.S.-based Access Industries. Lyondell produces a feedstock used to produce other chemicals and operates a refining business, and Basell produces plastics.


Independent oil and gas producer Plains Exploration and Production Company has reached a deal to buy Pogo Producing Company in a stock and cash deal valued at $3.6 billion. As part of the deal, Pogo shareholders will receive about two-thirds of a share of Plains Exploration common stock and almost $25 per share for each share of Pogo common stock. That's a total consideration of about $60 per Pogo share. Plains Exploration says total consideration for outstanding Pogo shares is 40 million Plains shares and about $1.5 billion. Both companies are based in Houston. At a time when some oil companies were posting record earnings, Pogo in February reported it swung to a fourth-quarter loss and said it was considering the sale of the entire company. The boards of both companies have unanimously approved the merger agreement and each will recommend the transaction to their respective stockholders for approval. The deal is expected to close in the fourth quarter of this year.


Dallas-based Southwest Airlines is offering a buyout package for more than a quarter of its employees. Some 8,700 employees are eligible for the $25,000 payout, which is part of a package that includes medical and dental benefits, as well as travel privileges in some cases, to flight attendants, baggage handlers and other employees. The offer does not include pilots and mechanics. August 10th is the deadline to accept the offers, which began showing up in their mailboxes this week. Southwest spokeswoman Brandy King says the company didn't have a target number of job or cost reductions it hoped to achieve. King says more than 1,000 Southwest employees took buyouts in 2004. Southwest has 33,000 employees, including 2,866 workers in Houston.

American Airlines and Continental Airlines have asked federal regulators for the right to operate new nonstop flights between the United States and China beginning in March 2009. Fort Worth-based American says it applied Monday for a route from Chicago's O'Hare Airport to Beijing. A similar bid by the nation's largest airline failed several months ago, partly because American's management and pilots couldn't agree on work rules for the flights. Meanwhile, Continental applied Monday to fly between Newark, New Jersey, and Shanghai. The Houston-based airline says its flights would serve the financial hub of New York and a large Chinese-American population in the area. Air service between the two countries is restricted by agreements between the two governments. U.S. airlines eager to tap the growing Chinese market must apply to the U.S. Department of Transportation for new routes. In the competition for Chinese routes, U.S. airlines gather support from politicians and customers to sell their proposals to federal regulators. For example, American boasted support from four U.S. Senators and three governors. Suburban Washington-based U.S. Airways wants to fly non-stop between Philadelphia hub and Beijing. Atlanta-based Delta asked to fly from Atlanta to Beijing and Shanghai; and twin cities-based Northwest filed to fly between Detroit and the same two Chinese cities.

American Airlines reports its sister carriers will shuffle service at Dallas Love Field. American on September 5th is ending flights from Love Field to San Antonio and to St. Louis, but doubling Love Field service to Austin and Kansas City. American competes head-to-head with Southwest Airlines at Love Field and had already switched to smaller jets in April. American spokesman Tim Wagner says Love Field customers--especially business travelers--favored service to Austin and Kansas City and wanted more frequent flights. Wagner says flights from Love Field to San Antonio and St. Louis "are not performing as well.'' He declined to provide numbers. American Eagle will operate eight daily flights to each Austin and Kansas City beginning September 5th. American's main hub is Dallas-Fort Worth International Airport.


The Wall Street Journal is reporting on its Web site that Rupert Murdoch's News Corporation has reached a tentative agreement to buy the Journal. Citing people familiar with the details, the Journal is reporting that Murdoch will pay $5 billion. The sale still needs the approval of the full Dow Jones board. It's scheduled to meet today. It must also be approved by the Dow Jones controlling shareholders, the Bancroft family.


The Illinois House has approved an incentive package meant to land the cutting-edge FutureGen coal project. The measure now goes to the Illinois Senate. The plan offers about $80 million in incentives and also protects developers from legal action over any injuries. Illinois is competing with Texas for the $1.5 billion project. FutureGen would be a prototype plant meant to produce almost no emissions. The carbon dioxide it generates would be stored underground, although some environmentalists question whether the technology is reliable. One study found the project could create more than 300 jobs and $20 million in annual wages for eastern Illinois.


The Port Commission of the Port of Houston Authority has approved $3.1 million in construction and maintenance contracts at container terminals. The commission also approved a proposal to conduct a goods movement air emission inventory. This will include an update to capture emission from ocean-going vessels and harbor craft, as well as for rail and on-road truck activities.


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