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American Chemical Corporation

American Chemical Corporation

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Published by Kishor Chindam

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Published by: Kishor Chindam on Jun 26, 2012
Copyright:Attribution Non-commercial


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Executive Summary
American Chemical Corporation’s Collinsville plant in Alabama is being sought by Dixon a
speciality chemicals company. This plant mainly specialises in Sodium Chlorate production
and fits well with Dixon’s strategy of supplying chemicals to paper and pulp
industry. It
would also complement Dixon’s existing product line. The plant costs $12million in
investment and requires up to$ 2.25 million for upgrading to new technology.An in-depth investigation and analysis is conducted for both the company and the industryto accurately determine the worth of investment in the Collinsville plant. Net present valuesare calculated for all possible scenarios. After a thorough analysis of the data, suitablerecommendations are provided.
Table of Contents
Dixon, an American specialty chemical producer, wants to buy Collinsville plant fromAmerican Chemical Corporation, another typical chemical company in 1979. Dixon wants todiversify its product line by acquiring the aforesaid plant, which produces sodiumchlorate tosupply to paper producers in South-eastern part of the US. This plant initially cost USD 12million and additional USD 2.25 million needed to buy laminate technology to increaseefficiency and profitability of the plant in order.
About The Collinsville Plant
American Chemical Corporation’s plant in Collinsville had the capacity to produce 40000
tons of sodium chlorate per year. Sodium chlorate is produced via the electrolyticdecomposition of salt, water and energy. The important factors for us to consider regardingsodium chlorate is where the demand for this chemical comes from. 85% of demand for theproduct is derived from the paper and pulp industry, where it is used in the production of the bleach that is used to whiten the paper. The remaining 15% comes from its use as a soilsterilant, in uranium mining and in the production of other chemicals.
Sodium Chlorate Market in USA
Bargaining Power of Customers
Customers include Paper & PulpProducing Companies like GeorgiaPacific and Universal
Because of high competition amongthe sodium chlorate producers, thebargaining power is being increased.
The demand is also increasing at therate of 8 to 10% per year with extrausage in the plant effluent problemsof paper corporations.
Competition within Industry
Highly Competitive Market
Market Leaders like Hooker,Pennwalt, American & Kerr-McGeehave more than 55% of the USMarket
Huge number of small mediumenterprises with active shares in thesodium chlorate market in US
Paper Companies like Universal alsohave their own NaClO3 plants activelyparticipating in the competition.
Companies like Brunswick andSouthern are specialised only inNaClO3 production

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