23 October 2000 00:00 [Source: ICB Americas]Vestolit, the German polyvinyl chloride manufacturer, and its private-investor owners have pulled out of negotiations to take over EVC International, following a slowdown in demand for PVC in Europe.
EVC says that because of higher raw material costs and a 15 percent decline in PVC prices in Europe since June, it expects an operating loss during the second half of the year.
The investors behind Vestolit, led by Candover, London, and D. George Harris & Associates, New York, planned to restructure PVC production in Europe through an acquisition of EVC.
Last December, they bought Vestolit from Degussa-Hüls for more than DM 300 million ($154 million) with the long-term goal of using it as a platform for reorganizing the industry into bigger players with large, integrated plants.
If the EVC acquisition had gone ahead, it could have led to a separate deal bringing closer ties between EVC and the chlorine operations of ICI and EniChem. Those companies each have a 16 percent share in EVC and are its main suppliers of chlorine.
"It is a pity that the takeover has not taken place because the plan for a merger of EVC and Vestolit and maybe one or two other PVC players was an attractive one," says an EVC spokesperson.
Analysts say Vestolit may now seek a merger with the PVC division of Norsk Hydro, which the Norwegian oil, gas and fertilizer company wants to divest. A proposed merger between that business and EVC fell through a few years ago.
"After the collapse of two possible mergers, EVC has to make itself more attractive to potential partners," says a London-based consultant. "It has special problems because, unlike other major producers, it is not backward integrated into raw materials. It needs to take radical action, otherwise it could be in financial difficulties."
EVC appears likely to face a loss in 2000 after only breaking even in the first half of the year. The company has already posted losses for two consecutive years.
EVC plans to renegotiate some of its loans and seek arrangements with ICI and EniChem to reduce the cost of chlorine and ethylene.
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