Filed by Lyondell Chemical Company
Pursuant to Rule 425 under the Securities Act of 1933 and
Deemed Filed Pursuant to Rule 14a-6 under the Securities Exchange Act of 1934
Form S-4 Registration Statement File No.: 333-114877
Subject Company: Millennium Chemicals Inc.
Additional Information:
On October 15, 2004, Lyondell Chemical Company (“Lyondell”) filed with the Securities and Exchange Commission (the “SEC”) the definitive joint proxy statement/prospectus regarding the proposed transaction between Lyondell and Millennium Chemicals Inc. (“Millennium”). Investors and security holders are urged to read that document and any other relevant documents filed or that will be filed with the SEC as they become available, because they contain, or will contain, important information. Investors and security holders may obtain a free copy of the definitive joint proxy statement/prospectus and other documents filed by Lyondell and Millennium with the SEC at the SEC’s web site at www.sec.gov. The definitive joint proxy statement/prospectus and the other documents filed by Lyondell may also be obtained free from Lyondell by calling Lyondell’s Investor Relations department at (713) 309-4590.
Forward-Looking Statements:
This release contains 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 and the parties’ ability to achieve expected synergies in the transaction within the expected timeframes or at all. Additional factors that could cause Lyondell’s results to differ materially from those described in the forward-looking statements can be found in Lyondell’s Annual Report on Form 10-K for the year ended December 31, 2003, which was filed with the SEC on March 12, 2004, and Lyondell’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004, which was filed with the SEC on November 8, 2004.
This filing contains slides used by Lyondell in presentations during analyst conferences on November 10-12, 2004. This information is being filed pursuant to Rule 425 under the Securities Act of 1933.
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Positioned For The Cyclical Upturn
Boston Visits November 10 – 11, 2004
This presentation contains 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 Chemical Company (“Lyondell”) and Millennium Chemicals Inc. (“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 and the parties’ ability to achieve expected synergies in the transaction within the expected timeframes or at all. Additional factors that could cause Lyondell’s results to differ materially from those described in the forward-looking statements can be found in Lyondell’s Annual Report on Form 10-K for the year ended December 31, 2003, which was filed with the Securities and Exchange Commission (the “SEC”) on March 12, 2004, and Lyondell’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004, which was filed with the SEC on November 8, 2004.
In addition, on October 15, 2004, Lyondell filed with the SEC the definitive joint proxy statement/prospectus regarding the proposed transaction between Lyondell and Millennium. Investors and security holders are urged to read that document and any other relevant documents filed or that will be filed with the SEC as they become available, because they contain, or will contain, important information. Investors and security holders may obtain a free copy of the definitive joint proxy statement/prospectus and other documents filed by Lyondell and Millennium with the SEC at the SEC’s web site at www.sec.gov. The definitive joint proxy statement/prospectus and the other documents filed by Lyondell may also be obtained free from Lyondell by calling Lyondell’s Investor Relations department at (713) 309-4590.
Reconciliations of GAAP financial measures to non-GAAP financial measures are provided at the end of this presentation.
2
Lyondell Has Built a Major Global Chemical Enterprise
Global producer of basic chemicals, polymers, and fuels
Built one of the world’s leading chemical companies through:
Acquisitions and joint ventures New investment where differential
Our value proposition
Excel at low-cost operation in a mature industry
Return cash flow to investors:
Dividends and interest Debt reduction
3
The Following Areas Have Been The Principal Areas Of Investor Interest Over The Past Weeks:
What is the outlook for TiO2?
Impact of oil price?
Will U.S. ethylene assets be able to compete in the future?
What is the potential impact of PO capacity additions? Are strong LCR profits sustainable?
What is peak profitability?
4
TiO2 Manufacturing Locations
Ashtabula, OH
Baltimore, MD
Stallingborough, UK
Le Havre, France
Thann, France
Bahia, Brazil
Paraiba, Brazil (Mine)
Kemerton, Australia
Bunbury, Australia
5
TiO2 Demand and Supply:
Demand – 4.1 MM mtpa; $8 billion
Capacity – ~4.8 MM mtpa
End-Use Market
Ind. Coatings
Arch. Paint
Paper
Plastics
Other
Geographical Region C&S
America
North America
Asia
EE / ME / AF
Europe
Capacity
Others
Kronos
Tioxide
Kerr-McGee
MCH
DuPont
Source: Millennium Estimates and Published Information
6
Chloride Is Typically The Preferred Process Vs. Sulfate
Product Attributes
End use dependent
Better purity and particle size control
Finishing is similar
Process Attributes
Continuous process
Fewer process steps
Fewer people
Smaller facility footprint
Less waste produced
7
Chloride Is A Continuous Process With Fewer Steps And Less Waste
Sulfate-
batch
Sulfuric Acid
Digestion
Clarification
Hydrolysis
Filtration
Calcination
Finishing
Dilute Acid to Gypsum Recovery Iron recovery or disposal
Titanium Ore
Chloride-
continuous
Chlorination
Purification
Oxidation
Finishing
Coke
Recycled Cl2
8
Global Capacity Additions Have Typically Utilized Chloride Technology
Installed Capacity (000 MT)
6,000
5,000
4,000
3,000
2,000
1,000
0
1980 1982 1984 1986 1988 1990 1992
1994 1996 1998 2000 2002
Sulfate Chloride
Source: Millennium, Published Information
9
There Are Minimal Announced Capacity Additions
M Tonnes
Operating Rate
Demand
Capacity
6,000 5,500 5,000 4,500 4,000 3,500 3,000 2,500 2,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
100% 95% 90% 85% 80% 75% 70% 65% 60%
Operating Rate
Source: Millennium
10
The Following Areas Have Been The Principal Areas Of Investor Interest Over The Past Weeks:
What is the outlook for TiO2?
Impact of oil price?
Will U.S. ethylene assets be able to compete in the future?
What is the potential impact of PO capacity additions? Are strong LCR profits sustainable?
What is peak profitability?
11
The US Economy Is Benefiting From Economic Stimulus
Stimulus Change DGDP Leads to After 1 Year 2 Years
Fed Rate Reduction 100 BP 0.6 1.7
Real Dollar Decline 10% 0.4 1.6
Income Tax Reduction 1% of GDP 0.4 0.8
Stock Price Increase 20% 0.4 0.8
Oil Price Decline $10/bbl 0.2 0.4
* Source: Fed Reserve, Jan. 1999
12
Chemical and Plastics Demand Grows Rapidly As Economies Develop
Polyethylene Consumption By Nation
US
Singapore
Taiwan
Korea
WE
Malaysia
Japan
Thailand
China India Indonesia
PE Consumption/capita, lbs
12 0 10 0 8 0 6 0 4 0 2 0 0
0 5 , 0 0 0 10 , 0 0 0 15 , 0 0 0 2 0 , 0 0 0 2 5 , 0 0 0 3 0 , 0 0 0 3 5 , 0 0 0 4 0 , 0 0 0
2000 GDP/Capita
Source: CMAI 2001
13
Profitability Is Driven By Supply/Demand Fundamentals
Crude Oil vs. Equistar EBITDA
EBITDA
550 450 350 250 150 50 -50
1H99 1H00 1H01 1H02 1H03 1H04
40 35 30 25 20 15 10 5 0
Crude Price
EBITDA
Crude Price
U.S. Ethylene Operating Rates vs. Equistar EBITDA
EBITDA
550 450 350 250 150 50 -50
1H99 1H00 1H01 1H02 1H03 1H04
100 95 90 85 80 75 70
Operating Rate
EBITDA
Operating Rate
Source: Platt’s, CMAI
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Our Results Reflect Improving Conditions
EBITDA $MM
Quarterly EBITDA
500 450 400 350 300 250 200 150 100 50 0 -50
Q1 2003 Q2 2003 Q3 2003 Q4 2003 Q1 2004 Q2 2004 Q3 2004
IC&D 100% Equistar 100% LCR
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The Following Areas Have Been The Principal Areas Of Investor Interest Over The Past Weeks:
What is the outlook for TiO2?
Impact of oil price?
Will U.S. ethylene assets be able to compete in the future?
What is the potential impact of PO capacity additions? Are strong LCR profits sustainable?
What is peak profitability?
16
Ethylene Is Recovering From A Significant Trough
Ethylene Supply/Demand Balance—North America
Bln lbs
Rest of World
Effective Operating Rate (at 96% on-stream-time)
N. America
N. America Demand
110 100 90 80 70 60 50 40
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Operating Rate
100% 95% 90% 85% 80% 75% 70% 65%
Source: CMAI / Equistar (September 2004)
17
Liquid Cracking Provides an Advantage vs. Ethane Raw Materials
Equistar Capability
NGL 37% Liquid 63% N. American Industry (ex. Equistar) Liquid 25% NGL 75%
Liquid Cracking Variable Cost Advantage vs. NGL Ethane – Light Naphtha Cost of Ethylene Spread
Average
¢/lb ethylene
7 6 5 4 3 2 1 0
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 H1 2004
Source: CMAI, Chem Data, and Lyondell 18
Future Ethylene Capacity Additions Favor a Growing Liquid Raw Material Advantage
2004 — 2009
2003 Demand Blbs Demand Growth Blbs Olefins Plant Supply Growth Blbs DBlbs
Ethylene 226 56 55 (1)
Propylene 134 38 15 (23)
Ethylene / Propylene 1.7 1.5 3.7 —
Source: CMAI September 2004
19
The Following Areas Have Been The Principal Areas Of Investor Interest Over The Past Weeks:
What is the outlook for TiO2?
Impact of oil price?
Will U.S. ethylene assets be able to compete in the future?
What is the potential impact of PO capacity additions?
Are strong LCR profits sustainable? What is peak profitability?
20
Globally Propylene Oxide Is Following A Similar Trend With Minimal Supply Additions
B Lbs/yr
Operating Rate
Demand
Supply
20 18 16 14 12 10 8 6 4 2 0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Operating Rate
100% 90% 80% 70% 60% 50%
Source: LYO, SRI
21
PO Technology is Entering its Third Generation of Innovation
1st Generation 2nd Generation 3rd Generation
Technology Chlorohydrin Peroxidation Direct Oxidation
Initial Application 1910 1960/70s 2000/10
Key Producers Dow POSM—Lyondell, Shell
China (several) POTBA – Lyondell
PO/Cumene – Sumitomo/
Lyondell JV
Development Efforts PO/H2O2—Dow/BASF Lyondell
22
Steps Toward Increased IC&D Cash Flow $ MM/Yr
600 500 400 300 200 100 Base
Potential Cash Improvement From 2003
Complete PO-11 Capital Spend
Convert PO/SM Purchases on Production
1999 PO / TDI SM Margins
MTBE Resolution
Sell-out at 1995 PO / TDI / SM Margins
23
The Following Areas Have Been The Principal Areas Of Investor Interest Over The Past Weeks:
What is the outlook for TiO2?
Impact of oil price?
Will U.S. ethylene assets be able to compete in the future?
What is the potential impact of PO capacity additions?
Are strong LCR profits sustainable?
What is peak profitability?
24
LCR Important Cash Generator – Operating Reliability and Crude Deliveries Drive Strong Performance
MB/day
300 250 200 150 100 50 0
Net Distribution To LYO, $MM
CSA Spot Mkt
1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04
2 22 49 7 67 69 55 32 54 89 138
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Industry Margins Have Rebounded with Growing Worldwide Demand & Limited Refining Capacity
WTI Crude Oil Refining Margin
3/2/1 Refining Spread ($/Bbl) $12.0 $10.0 $8.0 $6.0 $4.0 $2.0 $0.0
Jul-02
Sep-02 Nov-02 Jan-03 Mar-03 May-03 Jul-03 Sep-03 Nov-03 Jan-04 Mar-04 May-04 Jul-04 Sep-04
Source: Platt’s
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The Following Areas Have Been The Principal Areas Of Investor Interest Over The Past Weeks:
What is the outlook for TiO2?
Impact of oil price?
Will U.S. ethylene assets be able to compete in the future?
What is the potential impact of PO capacity additions?
Are strong LCR profits sustainable?
What is peak profitability?
27
Lyondell Has Maintained Ethylene Chain Leverage While Diversifying Total Chemical Leverage
Pounds / Share
1994 Jan. 1, 2004 Post Transaction Closing
Petrochemicals
Ethylene 45 46.5 47.5
Styrene — 16.5 12
Propylene Oxide — 13.5 10
TDI — 3 2.5
Acetic Acid — — 5
TiO2 — — 6
45 79.5 83
Derivatives
Polyolefins 5.5 24 24.5
Ethylene Oxygenates — 6.5 6.5
PO Derivatives — 9.5 7
Vinyl Acetate (VAM) — — 3.5
5.5 40 41.5
Notes: Lbs refers to capacity times ownership percentage.
1994 2004 Post-closing (pro forma)*
Share Count 80 MM 177 MM 245 mm
* Assumed 1.05 exchange ratio
28
Enterprise Earnings Capability Far Exceeds Recent Results
(Current Ownership – Pre-Millennium Transaction)
Cycle EBITDA Potential $MM
Recession/ Trough
Pre-Recession $6.90 / share
Peak $1.40 / share
2003 Proportional Interest, Dividends & Capital
3000 2500 2000 1500 1000 500 0
2003 1999/2000 1995 Margins1 1988 Margins1 Margins 1
LCR IC&D Equistar
1 Chem Data/CMAI industry margins conditions for IC&D and Equistar products (ex. MTBE) applied to current capacities and ownership, LCR 2003 EBITDA. Note: Assumes 2003 capital structure; 175 MM shares.
29
There Is A Significant Amount of Accessible Debt
Accessible Debt * $MM
1,400 1,200 1,000 800 600 400 200 0 $278
$900 $800 $730 $700 $700
$500 $485
$100 $1 $150
Lyondell Equistar Millennium Lyondell Equistar Millennium Lyondell Equistar Millennium Lyondell Equistar Millennium Lyondell Equistar Millennium
2004 2005 2006 2007 2008
Lyondell 9 3/8% ACC Debenture
Lyondell 9 1/2% Sr. Secured Notes Series C
Equistar 6 1/2% Notes
Millennium 7% Senior Unsecured Notes due 2006
Lyondell 9 5/8% Sr. Secured Notes Series A
Lyondell 11 1/8% Sr. Secured Notes Series D
Equistar 10 1/8% Senior Notes
Millennium 9 1/4% Senior Unsecured Notes due 2008
Lyondell 9 7/8% Sr. Secured Notes Series B
Equistar 11.2% Medium Term Notes
Equistar 10 5/8% Senior Notes
* As of October 2004
Accessible debt is shown for the first year in which it is callable and does not include subordinated debt. Debt with make-whole provisions is shown at maturity, including the $900MM Senior Secured Notes Series A due 2007 (Lyondell) and $700MM Senior Notes due 2008 (Equistar)
Millennium: Post Transaction
30
De-Leveraging Benefits All Stakeholders
Impact of Lyondell debt reduction at constant capitalization1
$3 Billion (with MCH)
Debt to Capitalization 45%
Avoided Interest Expense $ 300MM / Year
Earnings Improvement 80¢ / share
Share Price Improvement at Constant Capitalization $12.25 / share 2
1 Capitalization = debt + book value of equity + minority interest
2 Assumes 245MM shares outstanding
31
Equistar Chemicals, LP
Reconciliation of Net Income (Loss) to EBITDA
For the six-month periods ended June 30 (Millions of Dollars)
1999 2000 2001 2002 2003 2004
Net income (loss) $49 $208 $(107) $(1,207) $(195) $48
Add:
Depreciation and amortization 147 152 159 147 154 153
Interest expense, net 84 89 91 102 102 110
Cum. effect of accounting change - - - 1,053 - -
EBITDA $280 $449 $143 $95 $61 $311
32
LYONDELL CHEMICAL COMPANY
RECONCILIATION OF NET INCOME (LOSS) TO EBITDA
(Millions of dollars)
Q1 2003 Q2 2003 Q3 2003 Q4 2003 Q1 2004 Q2 2004 Q3 2004
Lyondell net income (loss) $(113) $(68) $(44) $(77) $(15) $3 $50
Add: Provision for (benefit from) income tax (55) (39) (27) (58) (9) 3 26
Interest expense, net 83 99 106 104 109 108 108
Depreciation and amortization 57 61 66 66 63 64 59
(Income) loss from equity investment in Equistar 100 32 26 70 (6) (33) (54)
Income from equity investment in LCR (19) (37) (43) (45) (56) (63) (89)
Lyondell EBITDA $53 $48 $84 $60 $86 $82 $100
Equistar net income (loss) $(146) $(49) $(40) $(104) $5 $43 $72
Add: Depreciation and amortization 78 76 76 77 76 77 81
Interest expense, net 49 53 51 54 55 55 55
Equistar EBITDA $(19) $80 $87 $27 $136 $175 $208
Proportionate Share—70.5% $(14) $57 $61 $19 $96 $123 $147
LCR net income $28 $58 $69 $73 $91 $103 $147
Add: Depreciation and amortization 28 29 28 28 30 28 29
Interest expense, net 10 9 8 9 10 8 6
LCR EBITDA $66 $96 $105 $110 $131 $139 $182
Proportionate Share—58.75% $39 $56 $62 $65 $77 $82 $107
Lyondell and Proportionate Share of Equity Investments—EBITDA
Lyondell EBITDA $53 $48 $84 $60 $86 $82 $100
70.5% of Equistar EBITDA (14) 57 61 19 96 123 147
58.75% of LCR EBITDA 39 56 62 65 77 82 107
Lyondell and Proportionate Share of Equity Investments $78 $161 $207 $144 $259 $287 $354
33
LYONDELL CHEMICAL COMPANY
RECONCILIATION OF LCR NET INCOME (LOSS) TO EBITDA
(Millions of dollars)
Q1 2002 Q2 2002 Q3 2002 Q4 2002 (b) Q1 2003 Q2 2003 Q3 2003 Q4 2003 1Q 2004 2Q 2004 3Q 2004
Net income (loss) $41 $63 $50 $59 $28 $58 $69 $73 $91 $103 $147
Add: Depreciation and amortization 29 30 28 29 28 29 28 28 30 28 29
Interest expense, net 8 7 8 9 10 9 8 9 10 8 6
LCR EBITDA $78 $100 $86 $97 $66 $96 $105 $110 $131 $139 $182
(a) EBITDA for LCR for the three months ended September 30, 2001 was originally reported as $116 million and was restated to include extraordinary charges related to early debt retirement, currently reflected in other expense, net.
(b) EBITDA for the three months ended December 31, 2002 was originally reported as $98 million and was restated to include extraordinary charges related to early debt retirement, currently reflected in other expense, net.
RECONCILIATION OF LCR NET CASH DISTRIBUTIONS
Q1 2002 Q2 2002 Q3 2002 Q4 2002 Q1 2003 Q2 2003 Q3 2003 Q4 2003 1Q 2004 2Q 2004 3Q 2004
Investment in LCR at beginning of quarter $29 $54 $71 $54 $68 $20 $1 $(14) 3 5 (20) Add: Equity in income (loss) of LCR 27 39 32 37 19 37 43 45 56 63 89 Other comprehensive loss due to minimum pension liability - - - (16) - - - 4 - - -Accrued interest converted to capital - - - - - 10 - - - - - Contribution payable to LCR - - - - - 3 (3) - - - - Other - - - - - - - - - - 1 Less: Investment in LCR at end of quarter (54) (71) (54) (68) (20) (1) 14 (3) (5) 20 68
Net cash distributions from
(contributions to) LCR $2 $22 $49 $7 $67 $69 $55 $32 $54 $88 $138
Distributions from LCR $24 $27 $63 $12 $88 $69 $58 $38 $63 $97 $148 Contributions to LCR (22) (5) (14) (5) (21) - (3) (6) (9) (9) (10)
Net cash distributions from
(contributions to) LCR $2 $22 $49 $7 $67 $69 $55 $32 $54 $88 $138
34
Lyondell Chemical Company
Reconciliation of Net Income (Loss) to EBITDA For the Twelve Months Ended December 31, 2003 and Hypothetical Net Income to Hypothetical EBITDA
Assuming Historical Industry Margin Conditions
Hypothetical Results Using
(Millions of dollars) 2003 Actual 1999/2000 Margins 1 1995 Margins 1 1988 Margins 1
Lyondell net (loss) income $(302) $190 $900 $1,155
Add: (Benefit from) provision for income tax 2 (179) 100 485 620
Interest expense, net 3 392 390 390 390
Depreciation and amortization 4 250 250 250 250
Loss (income) from equity investment in Equistar 228 (170) (940) (1,280)
Income from equity investment in LCR (144) (145) (145) (145)
Lyondell EBITDA $245 $615 $940 $990
Equistar net income (loss) $(339) $225 $1,315 $1,795
Add: Depreciation and amortization 4 307 310 310 310
Interest expense, net 3 207 205 205 205
Equistar EBITDA $175 $740 $1,830 $2,310
Proportionate Share—70.5% $123 $520 $1,290 $1,630
LCR net income $228 $230 $230 $230
Add: Depreciation and amortization 113 115 115 115
Interest expense, net 36 35 35 35
LCR EBITDA $377 $380 $380 $380
Proportionate Share—58.75% $222 $225 $225 $225
Lyondell and Proportionate Share of Equity Investments—EBITDA
Lyondell EBITDA $245 $615 $940 $990
70.5% of Equistar EBITDA 123 520 1,290 1,630
58.75% of LCR EBITDA 222 225 225 225
Lyondell and Proportionate Share of Equity Investments $590 $1,360 $2,455 $2,845
1 Using ChemData/CMAI industry margins for Lyondell and Equistar products, excluding MTBE, for the relevant periods applied to current Lyondell and Equistar capacities at 100% utilization and using constant LCR earnings at 2003 level. Except for 2003 Actual, this is not intended to present either historical or forecast earnings of Lyondell, Equistar or LCR.
2 Assumes 35% tax rate for hypothetical data.
3 Assumes constant capitalization and interest rates.
4 Assumes current capacity, book values and estimated useful lives.
35