Axiall Corp. has fired back at Westlake Chemical Corp., disputing many of the claims that Westlake made on Jan. 29 when it publicly announced its $2.9 billion takeover bid for Axiall.
Officials with Atlanta-based Axiall — a major North American producer of PVC resins and compounds and PVC-related construction products — filed a 26-page presentation with the Securities and Exchange Commission on Feb. 11.
The presentation also gives a clearer indication that Axiall plans to sell Royal Group Inc., one of North America's largest profile extruders. According to the presentation, Axiall plans to complete the sale of Royal by mid-2016.
The Westlake offer was $20 per Axiall share, including $11 in cash and almost 0.2 of a Westlake share. The offer was 108 percent more than Westlake's closing price of $9.60 on Jan. 22. The $2.9 billion total also includes Houston-based Westlake — a supplier of PVC and polyethylene resins as well as PVC pipe — taking on approximately $1.5 billion in Axiall debt.
Some of Axiall's responses to the Westlake offer include:
• Westlake's offer undervalued Axiall, since the firm's share price was $21.90 as recently as Nov. 6 and has been above $20 more than 90 percent of the time over the past three years.
• Westlake, according to Axiall, will have a net negative position in ethylene feedstock through 2017 and, as a result, would offer no advantage to Axiall's chlorovinyls unit. This page of the presentation is labeled “Westlake's core thesis is wrong: Where is the ethylene?”
• The corporate governance structure of Westlake also “raises red flags for Axiall stockholders,” Axiall officials said, partly because the Chao family — including president and CEO Albert Chao — owns 70 percent of Westlake's common stock. By comparison, Axiall has no controlling stockholder, they said.
• Westlake's commitment to the purchase attempt also was questioned by Axiall shareholders, since Westlake made a bid to acquire Axiall predecessor Georgia Gulf Corp. in September 2011 but withdrew that offer seven months later.
Axiall officials also said that their firm's new management team — including president and CEO Timothy Mann — have made positive steps to improve the company, including selling its aromatics business and seeking a buyer for its Royal Products unit, which generated 25 percent of Axiall's sales in 2015.
Another Axiall project is building its own ethylene unit in Lake Charles, La., through a joint venture with South Korean petrochemicals firm Lotte Chemial Corp. That unit is set to open in early 2019.
Mann was named interim president and CEO in July when longtime Georgia Gulf/Axiall leader Paul Carrico retired. Mann was given those full titles in November.
Axiall posted a loss of almost $760 million in the first nine months of 2015 but that loss can be attributed to a non-cash charge of almost $850 million for goodwill impairment. The charge was taken in the third quarter, as the firm wrote down the value of some of its holdings.
Axiall's nine-month sales fell 10 percent to $2.6 billion. The firm's chlorovinyls unit, which includes PVC resins and compounds, saw sales fall 13 percent in that period. By comparison, Axiall's building products unit fared better, with nine-month sales falling less than 2 percent. That unit posted nine-month operating profit of $32.5 million — up almost 19 percent vs. the same period in 2014.
A Westlake spokesman declined to comment directly on the Axiall filing, referring to his own company's original comments. “We believe we have made a compelling proposal to Axiall which is in the best interest of their shareholders,” the spokesman said.
On Feb. 1, officials with Brigade Capital Management LP of New York — a large Axiall shareholder — released a letter saying that although the firm also thought the Westlake offer was inadequate, they also said that they were “disappointed that Axiall did not engage more fully in active discussions” with Westlake. Brigade officials also requested that Axiall form a strategic review committee to consider several options, including the potential sale of the entire company.
On Wall Street, Axiall's stock price closed at $9.80 the day before the Westlake offer was revealed, but was at $18.73 in early trading Feb. 12 for an increase of 91 percent.