Westlake sweetens bid, Georgia Gulf still declines
HOUSTON (Feb. 1, 3:25 p.m. ET) — Westlake Chemical Corp.’s second offer to buy competitor Georgia Gulf Corp. received the same response as the first did: A resounding “no.”
This time, Houston-based Westlake offered $35 per share, according to a Feb. 1 news release. That’s 17 percent higher than the $30 offer it announced on Jan. 17. The new deal values Atlanta-based Georgia Gulf at about $1.2 billion.
Westlake officials pointed out that the new offer represents a 77 percent premium to Georgia Gulf’s 30-day average price, but Georgia Gulf officials countered in their own Feb. 1 news release that the $35 offer is less that what its stock traded for on Jan. 31. The price has gone up since Westlake went public with its offer.
“It continues to be the unanimous view of the board that $35 per share...is far from compelling and does not represent an appropriate price for us to discuss the sale of Georgia Gulf on a one-off basis,” Georgia Gulf president and CEO Paul Carrico said in the release. “As we have previously stated, we believe that Georgia Gulf is well positioned for value creation for its stockholders.”
The proposed deal would create a major North American PVC presence as well as a business with annual pipe, profile and tubing sales of almost $1.5 billion.
In Westlake’s release, president and CEO Albert Chao argued that “given marketplace uncertainties and the nature of the industry, we believe Georgia Gulf’s standalone prospects as an unintegrated PVC producer carry significantly greater risks than the certainty we are offering.”
Chao added that Westlake has had discussions with a number of Georgia Gulf shareholders who “are very interested in seeing this transaction completed.” Westlake already owns almost five percent of Georgia Gulf shares.
If the deal goes through, it could have a big impact on the North American plastics market. Both firms rank among the region’s largest PVC makers. A combined Westlake-Georgia Gulf PVC business would ranks as the second-largest PVC maker in the U.S./Canada region, with around 4.3 billion pounds of annual capacity and a market share of about 26 percent. The combined business would trail only Shintech Inc. in U.S./Canada market share. Such a move also would reduce the number of North American PVC makers to four.
Plastics News recently spoke with a U.S. PVC processor who does business with both Georgia Gulf and Westlake. Based on his knowledge of both companies, the buyer said he was concerned that Westlake would make significant changes to Georgia Gulf’s structure if its offer is accepted.
“I don’t think Westlake will leave things (at Georgia Gulf) alone,” he added.
In the first nine months of 2011, Georgia Gulf’s sales grew 20 percent to more than $2.5 billion, and its profit more than doubled to $61 million. But in 2010, the firm’s profit had fallen almost 70 percent, even as sales grew more than 40 percent to $2.8 billion. Georgia Gulf employs 3,600 at 14 sites in the U.S. and Canada.
Westlake employs about 2,000 at 16 global sites — 14 in the U.S., one in Canada and one in China. The firm posted sales of $3.2 billion in 2010 and sales of almost $2.8 billion in the first nine months of 2011. Westlake’s nine-month profit was up 40 percent from the year-ago period.