HAPPIER DAYS Lyondell Chemical President Dan F. Smith (left) and Hans-Joachim Kaiser, general manager of Bayer's polyurethanes business, at the June 27 cornerstone-laying ceremony for a propylene oxide plant in Rotterdam.
	BAYER AG PHOTO

According to a quarterly report Lyondell filed with the Securities & Exchange Commission, Bayer delivered a notice of claim in June seeking compensation over alleged "breaches of representations and warranties related to the condition of the business and assets." Neither company will give more details.

In the original deal, the two firms set up a formal resolution process that culminates in binding arbitration.

Nevertheless, Lyondell has pledged that it will "vigorously contest" the claim and has assured stockholders that, whatever the result of the resolution process, business will not be disrupted.

The polyols deal had been touted as a blessing for both companies. It helped Lyondell climb out of the $7 billion debt that it incurred when it purchased Arco Chemical in 1998. The deal gave Bayer competitive polyols operations in addition to its already global isocyanates business.

The polyols dispute arose just after the companies had seemingly settled an earlier difference about where to site a planned European unit for propylene oxide, the key raw material for polyols.

The plant was originally an Arco initiative that Lyondell shelved. Bayer and Lyondell resurrected it as a joint venture but disagreed over its location. Bayer wanted it in Antwerp, where it already had an integrated facility. Lyondell favored Rotterdam, where many of its derivatives units are located. In June, the two broke ground near Rotterdam.

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