Lubrizol growing by acquisition in polyurethane elastomers

Lubrizol has been steadily building its presence in thermoplastic polyurethanes (TPUs) and polyurethane elastomers since the firm bought Noveon, formerly BFGoodrich, in 2004. Simon Robinson talks to Timothy Madden about the firm's strategy

Lubrizol has gained deep historical roots in polyurethane elastomers. The firm's position started to grow when it purchased Noveon, which owned polyurethane assets of BF-Goodrich, the firm which first developed TPUs in 1959. In 2011, Lubrizol purchased Merquinsa, located in Barcelona, Spain.

Merquinsa is one part of Lubrizol’s polyurethane portfolio which has grown steadily by acquisition. Before the purchase of Noveon in 2004, Lubrizol’s business was confined to making lubricating oils used in the automotive industry and a range of other business sectors.

The Noveon purchase was a game changer for the firm, taking Lubrizol in to a new business direction. “There were a lot of major brands inside Noveon,” said Timothy Madden, Managing Director, Estane Engineered Polymers EMEAI and LifeSciences EMEA for Lubrizol.

“They had interest in the brands and maybe the deep understanding came after the purchase,” said Madden.

That purchase prompted Lubrizol to grow its portfolio of polyurethanes for CASE applications.

Lubrizol also strengthened it polyurethane portfolio with the purchase of SK Chemicals’ polyurethane elastomer business in 2008. Its purchase of Merquinsa in 2011 gave it access to technology developed at the company over fifty years.

This portfolio of purchases makes it one of the largest polyurethane elastomer players worldwide.

Lubrizol’s corporate headquarters is in the US. Lubrizol has two segments Lubrizol Additives and Lubrizol Advanced Materials.

The lubricants business, which makes up a large proportion of the Addtitives segment, is the historical heart of Lubrizol and has enabled it to become close to the automotive industry.

Lubrizol will continue to expand through strategic purchases and bolt-on additions, said Madden. Lubrizol is part of Warren Buffet’s Berkshire Hathaway company. Almost simultaneously with Lubrizol’s purchase of Merquinsa in 2011, Lubrizol was acquired by Berkshire Hathaway.

In addition to driving the European business, Madden has a number of geographical targets and business has a number of key industrial markets in its sights.

Madden, who has wide experience with management spent time in China, Korea, Singapore, Malaysia and most recently India, sees India as a key growth area.

“In the 1960s Lubrizol developed joint ventures with the Chinese government, Saudi government and Indian government. It started plants in Singapore and in Japan as well. These long-standing links forged by the lubricants business have proven useful in generating new businesses for the firm’s polyurethane business,” he said.

“We have focus on India. That’s one of the areas we feel is up and coming. We have a solid team working there,” Madden said. “The challenge for the team is ‘How do we make India the next China?’,” he said.

There are opportunities and a number of challenges in the Indian market in areas such as infrastructure, raw material supply and the small base of producers there, said Madden.

“India is different from China. China started as an export market. India is a domestic market,” said Madden. Growing in India will be based around “development of things that are fitting for the Indian environment. I come from the standpoint that China was very successful for us and it was a very big part of our growth in the past 10 years and we expect to find India as one of the progress drivers.

Although Madden is thinking about markets outside of Europe, the region is important, as the purchase of Merquinsa showed.

“Our intention is to make Europe a growth region by selecting business sectors that are growing very fast, our intention is to associate ourselves with those sectors. That’s what we spend our time and our marketing to identify those leading edges and tailor our product development to those areas,” said Madden.

Madden added: “Technology is developed in Europe, but not exclusively. Traditionally, we only did R&D in the US. Since we purchased Merquinsa, we purchased an R&D capability and that is integrated with the US.

Business sectors

Madden sees opportunities for polyurethane elastomers in business areas as diverse as automotive and food handling.

Lubrizol has used its strong links with the automotive industry to find ways into automakers. It has been able to use these to gain points of entry to pitch materials ideas to OEMs ahead of Tier 1 or 2 suppliers. This allows the firm to set the tone of conversations and improves its ability to have its materials specified, said Madden. Also automotive, high-end applications in interiors and to some extent exteriors.

Madden said Lubrizol products are used to improve the look of a car and driver experience: “This is about the beauty of the car protecting the paint and making interior parts for look and feel.

Typically, polyurethanes are used in areas where UV stability, gloss and gloss retention are important characteristics. Typically, it is high end cars where manufacturers and owners have these kinds of concerns.

Other areas that are interesting to Lubrizol include the market for food handling components “we have a good business with FDA approved materials”, Madden said.

He adds that there are opportunities in “robotics where there is a lot of dynamic movement in robotic parts. Water management, where we look at solutions like lay-flat hoses, temporary tanks” are current areas of interest, he said, adding that in the future parts for water distribution could be interesting.

In sports and recreation we “are incorporating some bio with some of the major brands in the world,” he added.

“We've picked out places where we feel the market is going to be growing strongly and where there are engineers who are interested in changing things in the world. We can’t do things by ourselves, it’s very much a partnership with our customers and others in the value chain,” Madden said.

In some ways Madden talks like the operator of a large systems house: “If you look at some of the big guys. They have raw material positions to consider and they have to run those raw materials through their process. That’s not our concern, our concern is the end customer and what does that customer need? If it means sourcing a new product we don’t have any qualms about it. If it needs sourcing a polyol that we don’t make it’s not an issue for us.

“I think some of the others are a bit constrained, but they have an advantage as well in low-cost raw materials. But we have an advantage which is intimacy with our customers and our ability to use so many different technologies.”

“It’s very human intensive, to understand a client’s needs and take that into an R&D plant; through initial developments; to pilot plans and to scale up.

Integrating Merquinsa into Lubrizol

At about the same time that Berkshire Hathaway was buying Lubrizol, Lubrizol was in the process of buying Merquinsa. Madden explained: “for the past three years we have been looking at how to complement the Merquinsa and Lubrizol brands and building strong presences.

Merquinsa was historically strong in adhesives.

Purchasing Merquinsa gave Lubrizol access to another suite of polyurethane tools. “We were polycaprolactone copolyester based, then we developed a copolymer which is very transparent. There’s polyether in it, it has the best of both worlds,” said Madden.

Merquinsa had also developed a bio-based TPU. Madden said: The raw material is naturally occurring and there are a number of different sources “We went into it on the basis that people wanted something bio-based, and we realised that these polyols are producing polyurethane different properties and these are valuable.

Biopolymer benefits 

Unlike other sectors -- such as high volume flexible foam -- where there is strong demand for biopolyols to be direct drop-in replacement, the CASE market seems to welcome them for what they bring along.

“There are very few applications where we are finding that people want it to be identical and they want it green as an ultimate requirement. Everyone likes the idea of green but nobody has pushed from that standpoint,” said Madden.

But “we offer these kinds of properties, we’ve got something that can cycle faster than an existing material, that’s interesting. Bio is a bonus in that situation,” said Madden.

A third area where Lubrizol benefited from the Merquinsa purchases is in very low hardness TPU for a range of hot melt adhesives. Historically, it’s been hard to make TPU is with less than 50 Shore A hardness, said Madden. To do so. The TVs had to be plasticised like PVC, however plasticiser has a several problems. For example, it can leach out of the polymer and also it can then affect bond strength of the polymer parts.

“The best solution is not to have that. But when you make a polyurethane very soft you make it very sticky,” he said. “Some very clever people worked out a way to make polyurethanes are very sticky when the hot and not at all sticky when a cold

“We typically don’t talk about the base chemistry, but we do talk about product benefits, said Madden.