New York buyout firm Apollo Management LP agreed to buy General Electric Co.'s Advanced Materials unit for $3.8 billion in cash and stock, adding a $2.5 billion business to its specialty chemical portfolio.
Although the deal does not include GE Plastics, the announcement triggered immediate speculation on Wall Street that the plastics unit could be next. Several plastics industry sources - as well as financial analysts - have suggested that GE may be considering a sale of GE Plastics.
GE declined to comment.
Meanwhile, Apollo is building a large chemicals and plastics business of its own.
Last year, Apollo bought Columbus, Ohio-based Borden Chemical Inc. and merged it with its other chemical holdings to create Hexion Specialty Chemicals Inc. The purchase-based buyout firm plans to take Hexion public through a $38 million initial public offering.
Earlier this year, Apollo purchased the former Tyco plastics operations, as well as Evansville, Ind.-based Berry Plastics Corp.,
GE Advanced Materials, which employs 5,000, makes and distributes silicone-based products, sealants, adhesives and high-purity quartz and ceramics.
GE will keep a 10 percent stake in the new company. GE said in a news release that this sale ``is another big step in repositioning the industrial segment for faster growth and higher returns.''
Since its inception in 1990, privately held Apollo has managed more than $16 billion of investments. Buyout firms like Apollo have been on a buying spree this year, taking advantage of lower interest rates.
Whether Pittsfield, Mass.-based GE Plastics will be the group's next target is the subject of speculation. The unit is one of the world's largest makers of polycarbonate and ABS. It also makes specialty engineering resins, PC sheet and film.
``There's too much capacity out there for PC and ABS,'' one industry source said. ``Those markets aren't bringing in the kind of returns they used to, so it wouldn't be a surprise if GE would look to sell them together or separately.''
GE Plastics posted first-half sales of $3.3 billion in 2006 - roughly flat with the same period in 2005.