Formosa Plastics Group is planning a U.S.-based initial public offering that would combine PVC/polyolefins maker Formosa Plastics Corp. USA with plastic pipe producer J-M Manufacturing Co. Inc. and PET resin maker Nan Ya Plastics Corp.
The IPO would help Formosa, a conglomerate based in Taipei, Taiwan, raise funding for a major growth project in China, according to a May 24 Bloomberg News story.
The first public mention of the IPO came when Formosa Plastics President C.T. Lee spoke with reporters May 24 after the firm's annual shareholders meeting in Taipei. Lee told reporters at the time that there are `` a lot of opportunities'' in U.S. capital markets that Formosa hasn't been using, and that the U.S. units will be combined ``because the U.S. market likes large-scale companies.''
Rob Thibault, Formosa's U.S.-based spokesman, said the IPO could take place in 2006 and will combine four legal entities: Formosa Plastics Corp. USA, Formosa Plastics Corp. America, Nan Ya Plastics Corp. USA and Nan Ya Plastics Corp. America.
Livingston, N.J.-based Formosa Plastics Corp. USA is one of North America's largest PVC makers and is a sizable producer of polyethylene and polypropylene. J-M was No. 3 in a recent Plastics News ranking of North American pipe, profile and tubing makers, with annual sales estimated at $625 million. Nan Ya has a smaller presence in PET, but still holds about 5 percent of North American capacity.
Formosa Plastics Corp. USA employs more than 2,300 and posted sales of more than $2.5 billion last year. No employee or sales totals were available for Nan Ya.
A Formosa IPO would be the fourth plastics-related IPO in the past year, joining offerings from Westlake Chemical Corp., Celanese AG and Huntsman Corp.
Results from those efforts have been mixed. Of the three, Westlake has been the most successful. Its stock debuted at around $15 per share in August and passed $36 in March before coming down to a recent $25 - a 67 percent bump-up in nine months as a public company.
Industry sources said there are some intriguing parallels between Westlake and Formosa, since both make PVC and polyethylene and operate a pipe unit. In Westlake's case, the pipe business is North American Pipe Corp. of Houston, which was seventh in the Plastics News ranking, with estimated sales of $345 million. Both firms have Taiwanese ownership, with Westlake controlled by Chao Group.
While it appears Westlake timed the market right, Celanese and Huntsman have not been as lucky. Celanese opened at $16 in late January, passed $18 in March, but since has dropped back to its original price. Huntsman debuted at around $25 in early February and passed $28 later that month, but has slipped to a recent $19.
For plastics and chemical firms, finding success in the current IPO market ``isn't a sure thing,'' said Jeff Dancer, president of Allan F. Dow Group, a private equity firm in Houston.
``A lot of people think that because there's so much private capital that's plentiful and cheap right now, that it's a good time to put themselves up [for an IPO] and see what people will pay,'' said Dancer, who spent 25 years in the PE business with Phillips Petroleum Corp. ``But in our view, polyolefin prices have peaked, so it may be time to cash out of these markets.''
Dancer added that, because of increased regulatory and financial reporting requirements, being a public company ``isn't that much fun anymore.''
``Public companies have to do a lot more now [in reporting] than they used to,'' he said. ``But when you get down to it, going public is all about timing. That's where the risk is.''