Eastman Announces Portfolio Changes.

Business Editors

KINGSPORT, Tenn.--(BUSINESS WIRE)--Sept. 14, 2000

Eastman Chemical Company (NYSE:EMN) today announced business portfolio changes intended to improve earnings growth with lower capital intensity.

Earnest W. Deavenport, Jr., chairman and CEO, said that Eastman plans to divest a portion of its fine chemicals business having products that accounted for approximately 6 percent of Eastman's 1999 sales revenue. The fine chemicals product lines to be sold are used in the manufacture of a wide variety of products such as home care products, agrocultural chemicals and ethical pharmaceuticals.

Eastman also announced it has entered into a letter of intent to acquire the hydrocarbon resins and select portions of the rosins resins businesses of Hercules Incorporated. Terms of the acquisition, the completion of which is subject to negotiation and execution of definitive agreements, were not disclosed. No further announcements concerning this transaction will be made until such time as definitive agreements have been reached or discussions have been terminated. This transaction is subject to the approval of the boards of directors of both companies.

"These decisions support Eastman's corporate strategy to manage our product portfolio with a bias toward businesses that offer the potential for greater value creation, faster return on investment, less cyclicality and lower capital intensity," Deavenport said. "Our short-term emphasis is directed at growing our coatings, adhesives, inks and specialty polymers product lines and at improved earnings."

Fine Chemicals

Allan R. Rothwell, president of Eastman's chemicals group, said that Eastman's fine chemicals business offers a global reach, a good breadth of technology, strong manufacturing capabilities and people with significant expertise in fine chemicals. "We have made good progress on our previously announced short-term turnaround plan for fine chemicals, and a number of promising technologies, including EpB(R) derivatives for fine chemicals, are in the pipeline," Rothwell said. "Long-term, though, our fine chemicals product portfolio requires greater capital investment and longer payback periods than support Eastman's current corporate strategy."

Eastman fine chemicals manufacturing sites are located in Batesville, Ark., United States; in Llangefni, Wales, United Kingdom; and in Hong Kong, China.

Eastman has engaged J.P. Morgan as its financial advisor for the sale of the fine chemicals business.

Hercules Resins Business

Deavenport said the addition of the hydrocarbon resins and select portions of the rosins resins businesses from Hercules will strengthen Eastman's ability to provide a broader range of raw materials and services into the adhesives, inks and coatings markets.

"Combined with other recent acquisitions, Eastman will have a stronger position in hydrocarbon resins and rosins technology," Deavenport said. "Once this acquisition is complete, we will have a global adhesives business with manufacturing units in North America, Europe and Asia Pacific."

Under the terms of the letter of intent, Hercules facilities included in the acquisition are located in Jefferson, Penn.; Middelburg, The Netherlands; Stonehouse, England; and Uruapan, Mexico. Additionally, unit operations will be acquired - and then operated under contract with Hercules - at shared facilities in Savannah, Ga., and Franklin, Va. Together, these operations generated approximately $300 million in resins sales in 1999.

Eastman has engaged Salomon Smith Barney, Inc., as its financial advisor for this acquisition.

Headquartered in Kingsport, Eastman manufactures and markets plastics, chemicals and fibers. The company employs 15,000 people in more than 30 countries and had 1999 sales of US$4.6 billion.

Forward looking statements: This news release includes forward-looking statements concerning the transactions described therein, including statements regarding the structure of the transactions and Eastman's expectations regarding the likelihood of consummation of the transactions. In addition, this news release includes forward-looking statements concerning expectations for the remainder of 2000 and beyond regarding capital spending, volume, margin, sales and earnings expectations and strategies, and future business prospects for Eastman's Chemicals Group and Eastman's expectations as to the future impact of certain actions and plans Eastman intends to implement in its adhesives, inks and coatings product lines. Such expectations are based upon certain underlying assumptions, including those mentioned with the forward-looking statements. These expectations are subject to risks and uncertainties inherent in projecting future results. Risk factors that could materially affect statements made concerning the transactions include, but are not limited to: the timely receipt of necessary regulatory and other consents and approvals needed to complete the transactions, which could be delayed for a variety of reasons; the satisfactory negotiation of the transaction documents; and the fulfillment of all closing conditions to the transactions. Risk factors that could materially affect statements made concerning the results of Eastman's business include, but are not limited to: increased raw material and feedstock costs and the ability to successfully integrate the Hercules transaction on a timely and cost-efficient basis and to achieve projected operating earnings targets. Actual results could differ materially from expectations expressed in the forward-looking statements if one or more of the underlying assumptions and expectations prove to be inaccurate or are unrealized. Additional factors related to these and other future expectations are and will be detailed in the Company's filings with the Securities and Exchange Commission (SEC), including the Form 10-K for 1999, the Forms 10-Q for the first and second quarters 2000 and subsequent filings with the SEC.