HOUSTON (Updated May 10, 3:05 p.m. ET) — Westlake Chemical Corp. has withdrawn its offer to purchase rival Georgia Gulf Corp.
Officials with Houston-based Westlake announced the withdrawal in a May 4 news release. They added that Westlake plans to liquidate its holdings of GeorgiaGulf common stock “as market conditions permit.”
“We are disappointed in this result, but we continue to work on our previously announced important strategic initiatives,” Westlake President and CEO Albert Chao said in the release.
Atlanta-based GeorgiaGulf responded with its own release, but did not comment directly on the Westlake offer.
GeorgiaGulf “remains focused on executing the company's strategy and is confident that we are well positioned to create significant value for our stockholders,” Georgia Gulf President and CEO Paul Carrico said in the release.
Westlake first announced a $30 per-share offer for Atlanta-based GeorgiaGulf on Jan. 13. On Feb. 1, Westlake increased its offer to $35 per share. The second offer valued GeorgiaGulf at about $1.2 billion.
GeorgiaGulf officials rejected both deals, describing the final offer as “far from compelling.” Officials with both companies also engaged in a war of words through numerous press releases.
The latest announcement had a negative effect on GeorgiaGulf's per-share stock price, which fell almost 7 percent to just under $32 on May 7, the first full day of trading after the withdrawal was announced. Westlake announced the withdrawal just after trading ended on May 4. But by May 10, the price had recovered to $33.60 in early trading – down less than two percent from its pre-withdrawal amount.
GeorgiaGulf's per-share stock price had benefited from Westlake's offers. The price was at $24.50 on Jan. 12, the day before Westlake's first offer was made, but it's traded for between $30 and $36.50 since then.
The two firms compete with each other in the North American PVC market. Westlake also produces low density polyethylene, while GeorgiaGulf is a major regional supplier of construction-related PVC products.
The proposed deal would have created North America's second-largest PVC maker – trailing only Shintech Inc. -with more than 4 billion pounds of annual capacity and a market share of about 26 percent. It also would have reduced the number of North American PVC makers from five to four.
PVC market analyst Mark Kallman said in a May 10 email that the impact of the withdrawal to the overall PVC market “will be positive, as is the case whenever consolidation does not occur, allowing for more competition rather than less.” Kallman is with Resin Technology Inc. in Fort Worth, Texas.
Westlake realized that “walking away from the deal was in both parties' best interests,” according to stock analyst Sean Williams at the Motley Fool financial web site.
“It's not surprising to see some of the air lifted out from under Georgia Gulf's shares after the Westlake deal fell through,” he wrote in a May 7 note on the site. “But GeorgiaGulf's management does have a point – its results have been improving.”
GeorgiaGulf posted sales of more than $3.2 billion in 2011, up 14 percent from the prior year. Westlake registered similar 14 percent growth in 2011, with sales topping $3.6 billion.