George Frideric 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 bath.

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 systems.

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 environmental solutions.

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!

Gary