Georgia Gulf Corp. of Atlanta has moved to broaden its position as North America's second- largest PVC compounder by acquiring North American Plastics, a flexible PVC compounder based in Madison, Miss.
The acquisition will give Georgia Gulf about 15 percent of the North American PVC compounding market, combining its 11 percent with North American's 4 percent share, according to Georgia Gulf.
The purchase also will allow the company to make its debut in the flexible PVC market, where North American holds a 13 percent market share.
``The acquisition of North American Plastics significantly increases our presence in the higher-margin, value-added compound business,'' Georgia Gulf President and Chief Executive Edward Schmitt said in a news release. ``Historically, PVC compounds have demonstrated less cyclicality and consistently higher margins than the commodity side of our vinyl chain.''
North American has 190 million pounds of total capacity split between sites in Madison and Aberdeen, Miss. The company employs almost 100 and posted sales of $90 million last year. Its compounds are used in wire and cable, automobiles, appliances and a variety of consumer and industrial products.
Georgia Gulf, the seventh largest PVC maker in North America, had been one of North America's major PVC resin suppliers.
With the acquisition, Georgia Gulf's amount of internal PVC use will jump from 27 percent to 37 percent. The company has a goal of using 50 percent of its resin in-house, said Nancy O'Donnell, the firm's investor relations director.
O'Donnell said Georgia Gulf ``is open to look at other opportunities'' in the compounding market. She added the PVC industry is likely to see more such acquisitions as producers try to shore up drops in resin pricing with more profitable compounds.
``I think [consolidations and acquisitions] will happen at a faster pace,'' O'Donnell said. ``When the market's in a down time, it's clearly beneficial to expand downstream.''
Georgia Gulf trails only Geon Co. of Avon Lake, Ohio, in North American PVC compounding. Geon controls about one-third of the market as a result of its recent acquisition of Synergistics Inc. of Mississauga, Ontario.
North American owner John Chew will remain with the firm as a consultant for a limited time.
