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Axiall, Westlake strike buyout deal

June 10, 2016 Updated 6/10/2016

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Axiall, Westlake strike buyout deal

Westlake Chemical Corp. and Axiall Corp. have come to an agreement that will create the second-largest PVC producer in North America, and a major manufacturer of vinyl building products.

Westlake President and CEO Albert Chao said the combined companies will supply PVC from the United States to developing nations.

“PVC is a poor man’s plastic,” Chao said. “It uses chlorine as half of the feedstock and it’s relatively cheap with the low-cost natural gas price in the U.S. I think the U.S. is one of the lowest-cost producers of ethylene and chlorine as well as PVC, and there’s a large growth of demand for PVC going forward, especially in the developing nations.

“So I think the U.S. will be a great place to supply the world’s needs going forward,” he said.

Under the terms announced June 10, Houston-based Westlake will acquire the outstanding shares of Atlanta-based Axiall for $ 33 per share in an all-cash transaction that has been unanimously approved by both boards of directors. The deal has an enterprise value of about $ 3.8 billion, including debt.

Westlake’s previous proposal, which was made March 29, had an aggregate value of $ 23.35 per share in cash and stock.

Axiall had rebuffed that proposal, which had a total value of $ 3.1 billion including $ 1.5 billion of outstanding debt. Axiall then announced June 8 that it was considering a takeover bid from Lotte Chemical Corp., which is based in Seoul, South Korea, and has an office in Houston. Two days later, Axiall and Westlake announced that they had reached a definitive agreement.

Combined, Westlake and Axiall will have annual sales of $ 7.6 billion and a projected $ 1.5 billion in earnings before interest, taxes, depreciation and amortization.

“We strongly believe the industrial and strategic logic of this transaction is compelling. The combined company will be a leader in the North American olefins and vinyls business and together will create a larger, more integrated and diverse company,” Chao said in a conference call with analysts.

Axiall has seven chemical sites and four PVC compounding facilities with more than 20 billion pounds of chemical capacity per year, Chao said.

Westlake is a leading olefins producer and the largest integrated low density polyethylene producer in North America, he added.

Major plastics processors

The acquisition also combines two of the largest PVC building product manufacturers in North America: Westlake’s North American Pipe Corp. and Axiall’s Royal Group Inc.

North American Pipe had estimated sales of $ 930 million in 2014, ranking No. 3 on Plastics News’ survey of pipe, profile and tubing extruders. The company makes PVC pipe and profiles.

Royal Group makes siding, trim, decking and molding, and accounts for about 25 percent of Axiall’s sales. Royal ranked No. 5 in the latest Plastics News survey, although in February it sold its window and door profiles business to private equity firm OpenGate Capital of Los Angeles.

The acquisition, which will likely close in the fourth quarter, will create about $ 100 million of synergies every year after duplications in general and administrative costs are eliminated, the ethylene and natural gas supply chains are optimized, and global sales channels increase with an improved product mix, according to a presentation on Westlake’s website.

Axiall President and CEO Timothy Mann Jr. said this deal gives his company’s stockholders immediate recognition for the long-term value of the company.

“We believe this strategic combination will drive significant value for our customers and business partners as we create a North American chlorovinyls leader with a highly integrated chain, diverse product portfolio and a globally competitive cost structure,” Mann said in a news release.

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