Page 1
The evolution of a business and a series of polybutadiene resins
Ronald E. Drake
Retired (chemist)
October 1, 2010
Colorado ACS
The evolution of a business and a series of Polybutadiene resins
The products I am going to address began as visually and tactilely unattractive sticky brown masses that could be produced by polymerization of butadiene which was originally considered to be a waste product from petroleum distillation. Early chemists recognized quite soon that butadiene was an analog of isoprene which was known to be the defacto monomer present in sticky white curds which could be produced by wounding and collecting the milky fluids from various plants. The principal plant became known as the rubber tree and found early applications in rain coats, etc. Soon, following the invention of vulcanization, whereby natural rubber could be crosslinked by heating with sulfur, natural rubber began to be used in marketable items. Such vulcanization made NR tougher and less sticky.
Next, along came the automobile which needed a lot of oil, gas and rubber especially in tires. The scientific knowledge about natural rubber, petroleum and oil proliferated due to the hard work of many Chemists, Chemical Engineers and others interested in expanding the Automotive market. Some of these people turned their attention to manufacture of different types of rubber, including those from butadiene(BR), styrene-butadiene(SBR), Chloroprene(CR), with the result that butadiene was no longer a waste product, but a primary raw material.
Butadiene can be polymerized in two different configurations. The first configuration attaches the four carbon chain in a linear fashion leaving virtually all of the remaining unsaturation in the backbone of the chain. This can be achieved by several catalytic means including cationic or free radical methods. The second configuration requires a very powerful anionic catalyst that results in a virtually saturated backbone with pendant vinyl groups. This second structure looks very different from the straight chain configuration and results in very different chemical and physical properties. High vinyl polybutadiene due to the many pendant groups has a very much higher viscosity than does the linear type at equivalent molecular weight due to spatial and entanglement factors. The linear configuration is used in very large quantities in manufacture of tires, drive belts, and many other applications typical of the rubber industry. It undergoes vulcanization with sulfur and sulfur containing molecules, or peroxides and other free radical catalysts. The high vinyl polybutadiene is much more reactive and can undergo similar vulcanization or free radical cures, but also can be adequately polymerized by UV light and other chemical reactants to which the the straight chain polybutadiene is relatively inert.
Although high vinyl low molecular weightpolybutadiene was known to exist, it was little used. The linear type achieved a high level of usage assynthetic rubber. In the early 1950's Enjay (now Exxon) began offering Buton resins. These were low molecular weight, high viscosity liquids. In the late 1960's, several manufacturers began to offer the high vinyl type. One of these was the Richardson Company who bought Enjay's Buton resin technology and added them to their line of acrylic and epoxy products after coining the trade name Ricon for these materials. The main customers were rubber formulators who used the liquid resins to modify and/or improve rubber formulations. Properties improvements were, better adhesion to substrates, improved toughness, heat resistance, moldability, swell resistance, etc. Certain non-rubber uses were electrical castings, coatings, paint additives, adhesion promoters, etc. The largest use promoted by the Richardson Co. was in heat and fast neutron shielding for nuclear reactors in submarines. Other later competitors who came into the business were Revertex (English) and Nippon Soda (Japanese).
In 1972, the Richardson Co. approached Arapahoe Chemical, where I worked as a processdevelopment chemist and where Ralph Mika worked as a chemical engineer to manufacture the brown sticky resins for them. Their process, as most of the others suppliers up to this time, used finely divided sodium metal dispersed in xylene as the catalyst. The process was difficult to initiate and could become a runaway reaction if too much Butadiene was fed into the system before activation was properly initiated. It took a fine hand to get the reaction started without building heat and pressure.
After several months of production, Arapahoe Chemicals management decided that they did not want to produce additional quantities of these resins. Arapahoe found it difficult to maintain cleanliness while sandwiching other products between Ricon production and their usual products. This was an opportunity which dropped into our laps. Ralph Mika talked the Richardson Company into putting up some money to build a plant in a nearby location to produce these resins. Since Richardson had other uses for their plant they reluctantly agreed. The new plant was to be located in Golden, Colorado. A new company, Colorado Chemical Specialties was formed and that is how our new business began. Ralph Mika, Robert Klein and I became the original employees of Colorado Chemical Specialties. Since we could not pay much in salary, I continued to work at Arapahoe Chemicals and I would go down at night and on weekends to work. Ralph and Bob began the constructionof the new plant. Some outside contractors were necessary, but most of the work was done by the three of us. I got pretty good at threading pipe, etc. I got married again in March of 1973 and took a long honeymoon to travel to Australia, while construction of the new plant was completed.
The new plant proved to be adequate for production of a number of Ricon resin types, including a styrene-butadiene copolymer containing considerable pendant vinyl functionality. After my return from Australia, I took charge of setting up an improved quality control lab and provide tools for a research and development lab. Product began moving out of the plant in an orderly and satisfactory way, and the Richardson Company people were pleased with the result. Of course, there were problems, some amenable to daily attention, and some more difficult, such as the time when butadiene became in short supply due to multiple problems which lasted for several months.
Eventually it became logical for CCS to consider buying the rights to manufacture and market Ricon Resins. This idea was eventually accomplished by negotiating with the Richardson Company, a timed payout based on future sales. Putting this into action required hiring a salesman(Barry Lowe) immediately to call on acquired customers. Since our management was heavily technical, we brought in a retired sales manager (Pat Duffy) as a consultant. The long term solution to our sales and marketing problems were to work with several groups of sales agents. These agents were trained at our facility to understand and communicate the merits of our products and to take this knowledge to their customers. While a commission had to be paid, the customers had frequent updates regarding the use of our product and the system worked quite well. We later hired Pat Duffy to become our sales manager, which turned out to be a very positive factor.
There followed a number of years of growth and the introduction of new products and development of new markets for old products. This positive grand picture was brought to a disastrous endin April of l981 when a fire destroyed our plant. The lab, office and tank farm were spared. Most importantly, there was no loss of life. There was considerable reason to think that the Company was doomed to go to the bankruptcy heap. The national economy was in disarray, with extremely high interest rates for borrowing money. Many of our customers decided to turn to other manufacturers for substitute products. Insurance paid the landlord for the destroyed buildings, but the local governments would not allow construction of a new plant by refusing to issue a building permit. The company could not immediately pay for destroyed raw materials and otherwise pay down debt. There was strong public sentiment against having a neighbor with demonstrated fire hazard.
However, while cleaning up after the fire, Ralph Mika recognized that much of the equipment remained serviceable and could be cleaned up and repaired. Surprisingly, the local bank in Golden was willing to loan CCS enough money to rebuild at an usurious interest rate. Incredibly, the decision was made against what should have been impossible odds to rebuild the plant. There were great problems, which were resolved one by one, and in five months plus or minus a few days, the first batch of resin was drummed. There was no building housing equipment since the County refused to allow a building permit, and when winter arrived it became difficult to produce product. A small heated hut housed production personnel and it was due to their strength of character that the company stayed in business. One significant advance initiated at the time of rebuilding was the catalyst structure which allowedresin of better quality, color, uniformity, etc to be made.
The Ricon business grew steadily from late 1982 to 1988. There were new products and new ideas. There were problems to solve but the biggest problem was success. The Golden plant was still producing resin in the winter without protection from the elements. If a boiler was shut down water lines would freeze and deactivate the boiler even if antifreeze was used in the boiler. People froze up too. And production demands outgrew the plant equipment. It was time to find a new plant site and build a new plant.
This was easier said than done. We visited sites in Pueblo, La Junta, Lakewood, Cheyenne, Grand Junction, Golden, Brighton and others. Sites in other states were presented to us, but we all wanted to stay in Colorado. We searched far and wide for financing, compatibility to the local area, logical location for travel, shipping, labor availability, schools and recreation.
Grand Junction won our attention due to an active program to replace businesses which had been leaving due to the Exxon shutdown after their decision to abandon oil shale development in the area. There was an industrial building once housing Schlumberger, a number of local business that could supply much of the tankage, pipe, lumber, electric motors, and support services necessary to construct a chemical plant. In fact, petroleum plants are close cousins to chemical plants, and all the trained labor to construct such a plant was available locally. And last but perhaps most important, the local United Bank was willing to finance much of the costs of relocation and building a new plant. The Grand Junction Business Relocator Group were also willing to work with CCS and aid in the process of setting up our business in exchange for the promise of new jobs for local people.
The above activities during the summer of 1987, resulted in signed agreements with MesaCounty, the City of Grand Junction, United Banks, Schlumberger, etc. Construction to place a resin production plant in the building once used by Schlumberger for servicing the oil and gas industry began in October of 1987. By April of 1988, the new plant was nearly ready produce resin. It was necessary to run the old plant in Golden at top speed for a time to produce enough resin to accommodate a shutdown which would allow equipment to be torn down and shipped to Grand Junction for reinstallation. All this required careful timing. The old plant had to be moved, the site cleaned up, product moved to GJ, waste drummed and labeled for disposal, personnel moved for those electing to go to GJ, and help for those remaining in Golden to get a new job or at least job training for a new job. In all 58 truckloads of materials, equipment and household goods were shipped to Grand Junction. Ralph Mika was in charge of construction, while I remained in Golden to supervise the disassembly, shipping, clean-up andpersonnel matters needed to get the job done. The last weeks, I sat on a wicker trash basket, my desk was a large shipping crate with only a telephone and a few yellow tablets as tools. Oh yes, there was a decrepit coffee pot. There was no heat in the building--it was February and I wore a down parka.
The new plant was relatively beautiful, and was soon producing quality resin for customers, some of whom were clamoring for new production to fulfill their own production demands. Ralph Mika deserved a big pat on the back for his design. A few small problems were encountered and one very big one. The cost of building the plant exceeded projections by a significant amount. It became my job to call suppliers and other debt holders to arrange payment. It was necessary to design a payment plan which was sometimes months late. Our debt holders grumbled loudly, but I think they really understood the difficulty position we were experiencing. It turned out that as soon as they could see that we were paying precisely as we promised and that the debt amounts were reducing, the grumbling stopped, and I even received a few accolades for keeping to the plan. Within about six months, most of the bills were paid and we began hiring needed employees, including Rick Sapp who became our comptroller and office manager.
The business continued to grow throughout the next decade and by the end of 1999 had reached 50 employees.. During this time, we began to work with several investors such as Jim Timourian, a Canadian math professor who invested for a math club at the University of Edmonton, and Rick Sapp who was now employed as generalmanager also invested in the company. As time went on, we also hired Elvin Tuffly as general manager to allow Rick to work in other areas. In addition to these and other managers, we hired research and quality control chemists, plant maintenance people, production people, safety andregulatory people, etc. Colorado Chemical Specialties went through several name changes during this time, becoming Colorado Chemical, then Advanced Resins and finally Ricon Resins in 1993. The name "Advanced Resins" was found to be the name of another company who threatened to sue. Our faces turned red, and we heeded this warning and becameRicon Resins, which was a name already familiar to our customers. A salesman who had worked for Akron Chemicals, our agent in Akron, Ohio was hired to serve as President. His name was Larry Eucher and he served in the capacity of President until shortly after a decision was made to sell the company in 1999.
Ricon Resins worked through a number of sales agents in the USA and agents in Germany, Brazil, Japan, England andSweden to market our resins. It was necessary for technical people to travel with the agents to acquaint their customers with our products. There were also numerous conventions in the USA and several foreign countries, which provided opportunities to promote our resins. This included delivery of speeches on technical developments in our research laboratory. As Director of research and development, I was fortunate to be among those who traveled far and wide to do this work. We had a strong R&D group and continued to develop new products through 1999. During 1999 some in management believed that in order to succeed going forward into the future it was primarily necessary to concentrate on the products which were selling well and to put minimal effort into new products and research and development. While admitting that a significant research effort was costly, I remained convinced that an R&D effort was fully worth the cost and would eventually result in significant growth. This difference of opinion and the fact that those who started the company, including myself were getting long in the tooth, management decided that it was time to put the old horses out to pasture and sell the company to the highest bidder. With this I eventually and reluctantly concurred.
Thus began a series of discussions with accountants whose expertise was determination of the value of companies. Indeed, this became a time of almost daily meetings with accountants, lawyers, etc. Our employees could not help but notice, but most pretended that were unaware. The lawyers wanted to make sure company employment contracts were complete and satisfactory. Our president at this time, Larry Eucher, was not willing to sign any employment contract we could come up with and decided to go his own way. Thus previous general manager and minor stockholder, Rick Sapp agreed to navigate the sales effort. A thorough search turned up a company, Einhorn and Associates, Inc. to bring the sale to conclusion. We recommended that they talk to Sartomer Company, with whom we had maintained a friendly but vigorous competition over the years. sartomer, who was wholly owned by Total, a French oil company. Eventually Sartomer became the front runner and made an acceptable offer. Then came due diligence and writing the contract. This took a whole bevy of lawyers and about nine months to consummate. During these negotiations, Elf Acquitane and Total, two large French companies were entrenched in merger negotiations. Since Sartomer was wholly owned by Total, this slowed our sale. Stock was transferred in July of 1999 and it was February of 2000 before keys to the front door were transferred.