Filed by Millennium Chemicals Inc.
Pursuant to Rule 425 under the Securities Act of 1933 and
Deemed Filed Pursuant to Rule 14a-12 under the Securities Exchange Act of 1934
Subject Company: Millennium Chemicals Inc.
Commission File No. 1-12091
Date: May 21, 2004
These materials contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about the benefits of the proposed transaction between Lyondell and Millennium, including financial and operating results, Lyondell’s plans, objectives, expectations and intentions and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of Lyondell’s management and are subject to significant risks and uncertainties. Actual results may differ materially from those set forth in the forward-looking statements. The following factors, among others, could affect the proposed transaction and the anticipated results: approval by Lyondell’s and Millennium’s respective shareholders, amendments to Lyondell’s and Millennium’s respective credit facilities, the expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Act, the receipt of other competition law clearances and the parties’ ability to achieve expected synergies in the transaction within the expected timeframes or at all. Additional factors that could cause Millennium’s results to differ materially from those described in the forward-looking statements can be found in Exhibit 99.1 to Millennium’s Amendment No. 1 to its Annual Report on Form 10-K for the year ended December 31, 2003, which was filed with the SEC on April 27, 2004 (the “Amended Millennium 10-K”), and Lyondell’s registration statement containing a preliminary joint proxy statement/prospectus, which was filed with the SEC on April 26, 2004.
In addition, in connection with the proposed transaction Lyondell and Millennium have filed relevant materials with the SEC, including Lyondell’s registration statement containing a preliminary joint proxy statement/prospectus, which was filed on April 26, 2004. The definitive joint proxy statement/prospectus will be sent to holders of Lyondell’s and Millennium’s common stock when it becomes available. Investors and security holders are urged to read the preliminary joint proxy statement/prospectus on file with the SEC, the definitive joint proxy statement/prospectus when it becomes available and any other relevant documents filed by Lyondell or Millennium because they contain, or will contain, important information. Investors and security holders may obtain a free copy of the preliminary joint proxy statement/prospectus and the definitive joint proxy statement/prospectus (when it becomes available) and other documents filed by Lyondell and Millennium with the SEC for free at the SEC’s web site at www.sec.gov. The preliminary joint proxy statement/prospectus and the definitive joint proxy statement/prospectus (when it becomes available) and the other documents filed by Millennium may also be obtained
free from Millennium by calling Millennium’s Investor Relations department at (410) 229-8113.
The respective executive officers and directors of Lyondell and Millennium and other persons may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information regarding Lyondell’s executive officers and directors is available in its proxy statement filed with the SEC by Lyondell on March 16, 2004, and information regarding Millennium’s directors and its executive officers is available in the Amended Millennium 10-K. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, is contained in the preliminary joint proxy statement/prospectus and other relevant materials filed with the SEC and will be contained in the definitive joint proxy statement/prospectus and other relevant materials to be filed with the SEC.
EXPLANATORY NOTE: This filing contains a slideshow presented to Millennium’s customers and certain other individuals. The following information is being filed pursuant to Rule 425 under the Securities Act of 1933.
Millennium Chemicals
May 2004
AGENDA
Lyondell / Millennium Chemicals Merger
TiO2 update
Millennium’s value offering
1
Lyondell Merger Update
What is being announced
Creates the third largest independent publicly
traded chemical company in North America
Leading integrated commodity and
intermediates chemical businesses with
leadership positions across range of market
segments
Combined revenues of over $11 billion
Combined market cap of nearly $4 billion
Millennium will combine with Lyondell in
a stock-for-stock transaction
3
Significant Market Positions
1st Propylene oxide and styrene monomer globally
2nd Ethylene and propylene in North America
2nd TiO2 globally
2nd Acetic acid and VAM in North America
3rd Polyethylene in North America
58.75%
stake in largest extra heavy crude
refinery in North America
4
Rationale for the merger
Greater diversity better enables weathering of
economic and industry cycles
Increased global footprint
Simplified ownership of Equistar, enhancing ability
for future opportunities in the chemical industry
Greater scale provides greater access to capital
and other resources
Opportunity for operational synergies
Key benefits
5
Expected Company Structure
and Timing
During transition period, no change to existing
leadership or organizational structure
Combined company will be named “Lyondell”
Dan Smith will continue as CEO upon merger
Reporting structures not yet determined
Structure
Expect transaction will be completed in the third quarter
of 2004
Requires shareholder approval of both companies
Requires regulatory approval
Timing
6
Millennium TiO2 Update
MILLENNIUM HIGHLIGHTS
Leading market positions
Favorable industry dynamics
Broad product portfolio
Strong global reach
8
14 plants on 4 continents
Sales and distribution in over 90 countries
Over 41% of 2002 sales outside of the United States
STRONG GLOBAL REACH
Baltimore, MD
Perth/
Bunbury, WA
Bahia
Paraiba
Ashtabula, OH
Thann
LeHavre
Stallingborough
Jacksonville, FL
Houston, TX
Shanghai
Colonel’s Island, GA
Singapore
Sydney
Hong Kong
Japan
Korea
Brussels
São Paulo
9
BUSINESS PRIORITIES
Achieve world-class cost profile in core businesses
Focus on the customer by continuing to provide highly
competitive products and services
Improve financial flexibility through debt reduction
10
TiO2
Business Update
GLOBAL ECONOMIC GROWTH
Source: Consensus Forecast (April 5, 2004)
Real GDP % Change YOY
Region
North America
C&S America
Western Europe
Eastern Europe
Middle East & Africa
Asia Pacific
World
All major regions are expected to post stronger economic growth in 2004
compared with 2003.
2.5
(1.2)
1.1
4.6
1.8
2.3
1.9
3.0
1.5
0.8
5.5
3.2
3.8
2.6
4.4
4.2
2.0
5.0
2.5
4.3
3.7
3.2
3.3
3.0
4.9
2.2
3.8
3.7
2002 2003 2004 2005
12
TiO2 GROWTH
Long-term
Forecast
-
500
1,000
1,500
2,000
3,000
3,500
4,000
4,500
5,000
2,500
1980
1985
1990
1995
2000
2005
Demand (000 MT)
Actual
Forecast
CAGR = 2.2%
13
TiO2 GROWTH
2002 - 2007
CAGR’S
Region
Coatings
Plastics
Paper/Other
Total
North America
1.3%
2.6%
-2.3%
0.9%
C&S America
1.9%
1.8%
2.4%
1.9%
Brazil
2.6%
2.6%
2.6%
2.6%
Other Mercosur
1.1%
1.1%
2.6%
1.2%
Europe
1.2%
2.3%
1.9%
1.6%
Western Europe
1.2%
2.4%
2.0%
1.7%
EEMEA
1.3%
2.2%
1.7%
1.5%
Asia Pacific
2.9%
4.6%
1.7%
3.1%
China
5.6%
7.5%
2.6%
5.5%
Japan
-0.4%
1.1%
0.8%
0.2%
Total World
1.9%
3.0%
0.6%
2.0%
Businesses/Markets
Source: Millennium Chemicals
14
2004 DEMAND UPDATE
Demand (000 MT)
Actual
Estimate
Outlook
% D
Region
2002
2003
2004
03 vs. 02
04 vs. 03
North America
1,336
1,289
1,340
-3.5%
4.0%
C&S America
195
199
211
2.0%
6.0%
Europe
1,556
1,493
1,568
-4.0%
5.0%
Asia Pacific
1,041
1,082
1,147
4.0%
6.0%
Total World
4,127
4,063
4,267
-1.5%
5.0%
15
TiO2 DEMAND OUTLOOK
Demand is expected to rebound 5-7% in 2004. The 0.8% increase in 2005 and
the subsequent 2.2-2.1% growth thereafter is a return back to a 1990-2003 trend
line.
5.9%
-1.9%
8.6%
6.6%
5.6%
3.3%
7.2%
5.8%
3.1%
-5.9%
0.2%
5.9%
1.9%
8.7%
-0.3%
0.2%
9.6%
-4.3%
4.3%
5.2%
-4.3%
10.0%
-1.5%
5.0%
0.8%
2.1%
2.1%
2.2%
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
000 MT
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
Y-O-Y % D
Actual
Trend Line Forecast
Actual
Trend Line Forecast
16
MCH INSTALLED CAPACITY
MCH will rationalize certain equipment at its Le Havre, France sulfate plant in
Q2-04, which will reduce that plant’s rated capacity from 95k mt/year to 65k
mt/year. However, MCH
will recognize an aggregate gain of 10k mt/year of
production capacity at its Ashtabula, Ohio and Australian chloride plants,
primarily due to reliability improvements. Thus, in Q2-04, MCH’s total net
reduction of production capacity
will be 20k mt/year.
Installed Capacity (000 mt/year)
Plant
Process
2003
2004
04 vs '03
Ashtabula, Ohio
Chloride
210
215
5
HPP, Baltimore
Chloride
50
50
-
Bahia, Brazil
Sulfate
60
60
-
Le Havre, France
Sulfate
95
65
(30)
Thann, France
Sulfate
30
30
-
Stallingborough, U.K.
Chloride
150
150
-
Kemerton, Australia
Chloride
95
100
5
Total
690
670
(20)
% Chloride
73%
77%
3.7
pp
% Sulfate
27%
23%
(3.7)pp
17
INDUSTRY INSTALLED CAPACITY
1999
DuPont
21%
Millennium
16%
Kerr-
McGee
9%
Tioxide
13%
Kronos
10%
ISK
5%
Kemira
7%
Others
19%
2004
DuPont
23%
Millennium
14%
Tioxide
12%
Kronos
10%
ISK
4%
Kemira
3%
Others
20%
Kerr-
McGee
14%
% Share Total Capacity
4.447 million mtpa
% Share Total Capacity
4.748 million mtpa
18
INDUSTRY INSTALLED CAPACITY
19
Producer
000 MT
% Share
% Chloride
DuPont
1,095
23%
100%
Millennium
670
14%
77%
Kerr-McGee
668
14%
76%
Huntsman Tioxide
558
12%
29%
Kronos
475
10%
69%
Total Top Five
3,466
73%
75%
ISK
205
4%
55%
Kemira
130
3%
0%
Others
947
20%
15%
Total World
4,748
100%
60%
2004 Installed Capacity
TITANIUM DIOXIDE
Demand
vs Supply Growth
5.0%
0.8%
2.2%
2.1%
2.1%
0.7%
-0.6%
0.5%
0.4%
0.1%
0.2%
2.4%
-1%
0%
1%
2%
3%
4%
5%
6%
2004
2005
2006
2007
2008
03-08
CAGR
Announced Capacity Growth
Projected Demand Growth
20
TITANIUM DIOXIDE
Capacity
Rationalization
Millennium:
Reduced sulfate capacity by 30k mt/year at Le Havre, France (2004).
Idled sulfate production line at Hawkins Point facility, 44k mt/year (2001).
Kerr-McGee:
Idled one sulfate production line at the Savannah facility, 27k mt/year (2004).
Closed Antwerp sulfate production facility, 30k mt/year (2001).
Huntsman:
Reduced sulfate capacity by 40k mt/year at Grimsby, U.K. (2004).
Reduced sulfate capacity by 15k mt/year at Umbogintwini, South Africa (2004).
Industry:
The sulfate capacity reductions in 2004 total 112k mt/year, and represent 2%
of total industry capacity and 6% of total sulfate capacity.
21
TiO2 Producer Update
NL Industries spins off Kronos to shareholders
Sachtleben parent announces sale of TiO2 business
Lyondell to buy Millennium Chemicals
Kerr McGee to merge with Westport
Dupont announces 6% global workforce reduction
22
CAPACITY-DEMAND BALANCE
97%
91%
87%
86%
85%
91%
92%
94%
95%
84%
85%
90%
87%
84%
89%
84%
86%
89%
87%
2,500
3,000
3,500
4,000
4,500
5,000
2,000
5,500
6,000
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
60%
65%
70%
75%
80%
85%
90%
95%
100%
Demand-Capacity Ratio
Effective Capacity
Demand
Demand-Capacity Ratio
Outlook
The Demand/Capacity ratio is projected at 91% in 2004, which is above the
historical price support level. We anticipate that the market will be characterized
by excess demand,
which will create upward pressure on price.
23
Global Average Price Cycle and the D/C Ratio
-15%
-10%
-5%
0%
5%
10%
15%
Price as a % of Trend
80%
82%
84%
86%
88%
90%
92%
Demand/Capacity
Demand/Capacity (t-1)
Price as % of Trend
PRICE AND THE CAPACITY-DEMAND
BALANCE
24
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
TITANIUM DIOXIDE
Global Price Increase Announcements
2003
Australia
Asia
Central & South America
Europe, MEA
North America
2004 Q1
North America
Asia
Middle East & Africa
Central & South America
2004 Q2
MEA, Asia
C&SA
Region
Announced Amount
25
A $100 pmt
US $100 pmt
US $100 pmt
€ 100 pmt
US $0.06, CAN $ 0.08 per pound
US $0.05, CAN $ 0.06 per pound
US $150 pmt
€ 120 pmt or US $150 pmt
US $100 pmt
US $100 pmt
US$ 150 pmt
Value Offering:
Better Products and Services
Safety / Environment
Management commitment
Training / employee involvement
Accountability
Environmental Reportable Incidents
0
200
400
600
800
1,000
1,200
1998
1999
2000
2001
2002
2003
0.00
1.00
2.00
3.00
4.00
5.00
6.00
1995
1996
1999
2002
2003
Recordable Incidents - TRIR
1998
2000
1997
2001
27
Six Sigma Process
Customer-focused
improvement
Disciplined approach to
improve processes
Variance cost savings
Grass Roots Implementation
Six Sigma Benefits
0
5
10
15
20
25
30
35
40
2001
2002
2003
2004E
28
New product technology for high
efficiency
Committed to investment in R&D
Excellent understanding and penetration
of target markets
Superior performance products delivering
value to customers
New products launched and further
development continues
Support and expertise to enhance your
business
PRODUCT LINE EVOLUTION
The Rationale
Millennium provides superior global products
29
Coatings
• Tiona® 596 - the durable multipurpose
• Tiona® 595 - next generation multipurpose
• Tiona® 696 - next generation superdurable
• Tiona ® 568 - multipurpose sulfate rutile product
Plastics
• Tiona® 696 - next generation product
for superdurable
applications
• Tiona ® 90 - general purpose masterbatch product
• Two new sulphate masterbatch products are under
development
Paper
• Tiona® RCL-722 - designed for use in paper laminates
PRODUCT LINE EVOLUTION
Coatings, Plastics, Paper
30
ULTRAFINE TITANIUM DIOXIDE
Millennium Performance Chemicals produces a wide range of Ultrafine
Titanium Dioxide products. These products have nanometer particle size
and may be a colloidal suspension (a sol) or an
agglomerated powder.
The applications for these products include:
DeNOx SCR Catalysis (stationary and mobile)
Post-combustion Catalysis (other than DeNOx)
Fine Chemistry catalysis
Claus Catalysis
Photocatalysis
Coloured Pigments
Electroceramics and Electronics
Additives
31
MARKET UPDATE
Global macroeconomic environment continuing to improve. Experts
anticipate global economic growth of 3.7% this year year, compared with
2.6% last year.
Demand contracted slightly in 2003, but is expected to rebound » 5-7% in
2004 as global economic conditions continue to improve.
Declining demand through the 3rd
quarter of 2003 resulted in a market
characterized by excess supply, creating downward pressure on price.
However,
a 4th quarter rebound and stronger growth this year should push
the Demand-Capacity
Ratio above the price support level, resulting in higher
prices.
Supply growth not keeping up with demand growth due to low industry
profitability.
Improved product, selling and service offerings implemented to improve
total offering to customers
On average, price will be higher in 2004 due to the tightening capacity-
demand balance.
A linear trend model yields a long-term annual average growth rate of 2.2-
2.4%.
32