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Axiall, Westlake standoff goes to shareholders in June

May 4, 2016 Updated 5/4/2016

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Axiall, Westlake standoff goes to shareholders in June

Axiall Corp. and Westlake Chemical Corp. are headed for a showdown on June 17.

That’s when Axiall’s annual meeting of stockholders will be held in New York. Atlanta-based Axiall and Westlake of Houston have been negotiating — and not always peacefully — since January, when Westlake made an offer to acquire Axiall for $ 2.9 billion.

Westlake later increased the value of its offer to $ 3.1 billion. Both offers were rejected by Axiall management for undervaluing the company.

Both Westlake and Axiall are major PVC makers in North America. Westlake also is a large supplier of polyethylene and ethylene, and both companies are major producers of construction-related PVC products.

Each side has nominated its own slate of directors to be voted on at the annual meeting. Westlake’s slate includes plastics industry veterans Charles Crew and Randy Woelfel.

In a May 4 letter to Axiall shareholders, Westlake officials again laid out their case for acquiring Axiall, claiming that their proposal “represents greater value and certainty than Axiall’s standalone strategy and that Axiall “has a track record of value destruction and underperformance.” The letter was signed by Westlake President and CEO Albert Chao.

In their own May 4 letter to shareholders — signed by President and CEO Timothy Mann Jr. — Axiall officials said that adding directors nominated or compensated by Westlake “could have a chilling effect” on other parties in the process of making strategic changes to Axiall. Already this year, Axiall has sold its window and door profiles business and part of its PVC additives business.

Axiall officials also said in their letter that Westlake officials “unilaterally cut short discussions prior to what Axiall believed would be a critical meeting regarding synergies that could be achieved through a potential transaction.”

In 2015, Axiall posted sales of $ 3.36 billion — down 12 percent vs. 2014 — and a loss of $ 816.4 million. Most of the loss can be attributed to a non-cash charge of almost $ 850 million for goodwill impairment that Axiall took in the third quarter, as the firm wrote down the value of some of its holdings.

Westlake’s 2015 financial results showed sales of $ 4.46 billion and profit of $ 646 million. The sales total was up 1 percent vs. 2014, while the profit level was down almost 5 percent. Lower selling prices — particularly for polyethylene and ethylene feedstock — impacted Westlake in 2015.

On Wall Street, Axiall’s per-share stock price began the year near $ 15.50 but was at $ 24 in late trading May 4. Westlake’s per-share price started at $ 54.30 but was at $ 48.30 in the same comparison.

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