Handel composed Water Music which premiered in the
summer of 1717 when King George I requested a concert to be played as he and
his court floated on a barge down the River Thames.
Legend suggests that Handel composed these soothing strains to regain the favor
of the king. Whether this is true or not, he did something right because
today many portions of this composition are almost as familiar as water itself.
Such familiarity creates a problem. We may take the hauntingly
beautiful melodies for granted…as we do water.
We should not. Water (and perhaps good music) are essential
resources. I suspect that when Water Music was composed, King George (or
Handel) could have taken a quick swim in the Thames after the concert. Today,
because of pollution swimming in the River Thames (anywhere near London) is not
uch a good idea.
Yet water problems can be music to our ears…or at least to our
investment portfolio. We know that problems create opportunity and
there are as few problems that humanity faces as large as those
relating to having access to pure water.
Major cities are beginning to lose the battle. Water quality reports
by the Environmental Protection Agency increasingly mention possible
health risks “for people that have undergone organ transplants, cancer
patients on certain drugs, some elderly people, infants and people with HIV/Aids
or other immune system disorders from drinking municipal water.”
In short, municipal water supplies are not yet bad enough to kill
healthy people right away. Yet we can be sure that such water is not
doing much good either.
Even if we enjoy good health, it does not make sense to challenge our immune
systems every time we go to the tap for a drink of water or take a shower or
Because of the enormity of this problem, a number of our previous
messages have looked at the power of investing in water. I am focusing on and
beginning to invest in this sector because I believe water and water treatment
are among the hottest and most fundamental investments we can
make today. Water quality is one of society’s main concerns everywhere.
One of the
companies we reviewed wasGreat Lakes Chemical Corporation,
previously listed with the NYSE Code GLK. This firm
merged in July 2005 with Crompton Corporation to form
a new corporation, Chemtura, and is now traded under the
New York Stock Exchange symbol CEM.
This merger makes Chemtura the fourth largest U.S. Specialty chemicals company
and the world’s largest plastics additives company.
This merger gives the firm combined revenues of $3.7 billion and a
market capitalization of approximately $3.3 billion.
The company has a portfolio of global businesses that are competitive
in high-value market niches, but an added benefit is that the company has a
leading position in pool and other water purification chemicals.
Crompton Corporation supplies water treatment materials that help keep water
treatment facilities running smoothly and without interruption.
Durability and long service life of Crompton’s EPDM synthetic rubber
create a market for its use in tanks and fittings in water treatment
facilities. Crompton also supplies specialty chemicals that act as
corrosion inhibitors and foam-control agents in water treatment
This expertise is added to the
numerous water treatment chemicals manufactured by Great Lakes.
Headquartered in Middlebury, Conn., the company has 7,300 employees around
the world. Additional information concerning Chemtura is available at www.chemtura.com.
The company has estimated that the synergy of the merger will save
$10 million in 2005; $100 million in 2006; and $150 million in 2007.
Will these savings happen? Will the merger make the business
better? Mergers are always risky and the market has not been all that
keen about the get-together. Chemtura shares rose from the $14 to $17 range
after the merger but have now dropped back into the $12 range.
This, if the merger works well creates even more opportunity. Let’s
keep an eye on Chemtura and as it develops perhaps find some “opposite
the market” sentiment opportunity.
What we do know is that both businesses were leaders in segments of a huge
and growing industry. Will the new bigger, supposedly more
efficient merged firm be even better? We’ll see and if so holding
Chemtura shares in our portfolio can help us have good global investing.
Though Merri and I prefer natural ways to have pure water and favor
pollution reduction rather than chemicals, the reality is that
chemical treatment will part remain an important part of the world’s
water solution for some time. We have not invested in this company
at this time but will watch it as portfolios can profit in this type of
industry that has a harder edge as we look for more holistic
Tomorrow’s message looks at another way to profit in water, filtration
as a different way to resolve our need for pure, safe water.
Until next message, may your water and life be good!