Ethyl Corporation

With facilities in the United States, Japan, France, England, and Belgium, Ethyl Corporation was a leading manufacturer and marketer of value-added performance chemicals for the petroleum and plastics industries in the mid-1990s. The diversified company also produced high-tech chemical intermediates for detergents, polymers, electronics, agricultural chemicals, and pharmaceuticals. Through its subsidiary, Whitby Pharmaceuticals, Inc., Ethyl was also one of the United States' primary producers of ibuprofen pain relievers. Ethyl's history has been characterized by dramatic shifts in product and business focus that succeeded thanks to astute management. The Albemarle Paper Company was founded in 1887 by a group of businessmen in Richmond, Virginia, who were convinced that paper was a growth area for the nineteenth century. Situated by the James River, the company's mill produced both kraft and blotter paper. The company's early history was uneventful until 1918 when Floyd Gottwald grew impatient with his job as an assistant paymaster for the Richmond, Fredricksburg and Potomac Railways and went to work for Albemarle. By the 1940s Gottwald was presiding over the company's plantation-style Richmond headquarters. Floyd Gottwald, Sr., was once described by Forbes magazine as a 'curmudgeon' with 'a passion for anonymity,' but what Gottwald lacked in congeniality he made up for in business acumen. Having cut his teeth staying ahead of the topsy-turvy market for blotter and kraft paper, Gottwald was prepared when, in the 1950s, launderers began using polyethylene bags for the clothes they dry cleaned rather than the Albemarle-supplied paper bags. Rather than exit the business, Gottwald engineered the 1962 purchase of the Ethyl Corporation, a chemical company five times Albemarle's size, in part so that Albemarle could manufacture polyethylene bags. The headline in the Wall Street Journal read 'Jonah Swallows the Whale,' echoing the consensus among the business press that Albemarle's acquisition of Ethyl, the largest producer of anti-knock compounds for fuel, was the business coup of the decade. In another version of the buyout, Albemarle was interpreted as wanting to buy chemicals for bleaching paper from Ethyl, and the larger company was said to reject any agreement. 'That made us mad, so we waited two years and bought Ethyl for ourselves,' Gottwald was quoted as saying. The Ethyl Corporation was created by General Motors and Standard Oil following the 1917 discovery that a lead additive in gasoline would prevent car engines from knocking. The additive, called tetra ethyl, allowed the Ethyl Corporation to hold a substantial share of the gasoline additive market for years, even in the 1950s when the patent expired. The obvious potential buyers for the Ethyl Corporation were large chemical companies like Dow Chemical or Du Pont, but they were prevented from buying from Ethyl under the stringent anti-trust laws of the time. Standard Oil, although happy to sell its share of Ethyl, had never put its shares up for sale for just this reason. When Standard Oil was approached by Albemarle, it sold Ethyl for $200 million. Wall Street was surprised that Albemarle, a paper company with 1961 earnings of $1.8 million, could raise the necessary funds. It did so with the help of four insurance companies (including Prudential), several investment houses, and the Chase Manhattan Bank, each of which put up cash in exchange for notes. Albemarle immediately used Ethyl's depreciation to reduce its 100 percent debt to 80 percent. Nonetheless, the new Ethyl Corporation had a high debt to equity ratio. The new company was reorganized so that Albemarle Paper became a subsidiary of the company it had recently purchased. The new company derived 60 percent of its sales from tetra ethyl and the rest from paper and plastics. In 1963 Gottwald bought Union Carbide's VisQueen, a major producer of polyethylene film used for food packaging. In 1966 it developed the