Eastman to Become 2 Independent Companies to Enhance Shareholder Value

Eastman to Become 2 Independent Companies to Enhance Shareholder Value

February 5, 2001 — Eastman is announcing the beginning of a new strategic direction that will result in what is now our current company becoming two new independent companies.

The “Specialty Chemicals and Plastics” company will be a world leader in specialty chemicals and plastics, with a strong focus on providing customer solutions. It would include Eastman's presence in coatings, adhesives, inks, specialty polymers and plastics, and intermediates products. Eastman's digital business investments and ShipChem, Inc., as well as the investment in Genencor International, would be part of this new entity.

The “PET Plastics and Acetate Fibers” company will be a world market and cost position leader in PET plastics and acetate fibers and will also include Eastman's polyethylene business. Eastman's current PET business is the largest, the most global, and the most vertically integrated in the world, with the broadest product offering. The highly integrated fibers business is characterized by stable cash flows and excellent customer relationships.



Reasons for this Action

As I meet with Eastman men and women, I'm often asked questions about our overall growth strategy. As you know, we've been operating with two large groups of businesses — the Chemicals Group and the Polymers Group. Within those groups, we have a set of commodity type businesses and a set of specialty businesses. The challenge has always been that what's good for one type of business is not necessarily good for the other. We've also been saying for some time that we should provide some separation for our PET, fibers and polyethylene businesses from the rest of the company. These businesses need different structures and systems to be successful. Over the past year, we've looked at several options for our company. I believe what we're announcing today is the best choice - to create two new companies so that each can clearly focus on strategies that generate the most value for shareholders, for employees and for our customers. We're in a unique position that allows us to create two very strong, financially healthy companies - each that will be better able to take advantage of significant growth opportunities in their respective markets. Each company will start out with a history of strong and successful businesses. And each company will have the extra advantage of beginning a new corporate life with the ability to clearly focus on specific growth strategies for its types of businesses. What Happens Next We expect to complete this transaction by the end of this year's fourth quarter. I will remain with the company throughout the rest of this year to help guide the transition, then I plan to retire. Two talented individuals who have had successful careers with our company will lead the new companies. Allan Rothwell will become chief executive officer of the “PET Plastics and Acetate Fibers” company. Brian Ferguson will become CEO of the “Specialty Chemicals and Plastics” company. We'll be announcing other management appointments in the future. I'm sure you have many questions about this announcement - first and foremost are questions about pay and benefits and employment stability. So let me address that here. As you know, there's work under way to integrate our recent acquisitions and to improve productivity of our existing businesses, which will result in fewer people in the companies going forward. However, we expect that normal attrition and restrained hiring will allow us to avoid involuntary separations associated with the launching of the new companies. We expect pay and benefits to remain the same as what you have now. Let me also acknowledge that while most of your work will focus on achieving our business plans for 2001, some organizations will have additional work associated with the launch of the new companies. I realize that additional work is on top of a lot of other initiatives we have under way, including SAP R/3 and other integration work associated with recent acquisitions. I can assure you we will be making some adjustments in terms of priorities, because I know the organizations so heavily involved in that work cannot stretch themselves any further. A team consisting of Jim Chitwood, Theresa Lee, Jim Rogers, and myself will oversee the transition this year. To ensure we accomplish all the details we need to in order to launch the two new companies, we'll have a project team in place, led by Rick Witt of Worldwide Engineering & Construction. Rick worked in a similar capacity during our spin-off from Eastman Kodak Company, so he has the experience we need to help accomplish a huge task like this. Looking Forward I'm very excited about this announcement and very optimistic about the future of both new companies. This is all about empowering both companies to realize their fullest potential, which should in turn, benefit you, our customers, and our investors. We've created a special Web site to keep you up to date. Here you'll find the news release, questions and answers, and other documents related to this announcement. You can also use this site to submit questions as we go throughout the year. Answers to your questions and other information about this effort will be posted on the Web site as we go throughout this process.

Earnest W. Deavenport, Jr.

Chairman and CEO

Eastman Chemical Company

P. O. Box 511, Kingsport, TN 37663

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