21 May 2007 13:52 [Source: ICIS news]
LONDON (ICIS news)--SABIC will buy GE Plastics of the US for $11.6bn (€8.6bn) in a move widely expected in the market, General Electric said on Monday.
The Saudi Arabian petrochemicals major emerged as the frontrunner to buy the business on Friday after wire services quoted sources close to the deal.
“This transaction is another important step in the execution of this strategy, which has created a faster-growing, higher-returning set of businesses capable of delivering sustained performance," said GE chairman and CEO Jeff Immelt.
“This sale is the right move at the right time for GE shareowners,” Immelt added. “We received a good price from a respected global company in a highly competitive bidding process. We will use the proceeds to fund the stock buyback and strengthen the company through restructuring."
The company has signalled its intention to move further downstream in plastics, with the development of a polycarbonate business a priority.
“This acquisition of GE Plastics represents another step in SABIC’s growth and diversification to become one of the world’s leading manufacturing companies," Mohammed al-Mady, vice-chairman and CEO of SABIC, said. "The deal brings us a new market and 30,000 important customers worldwide.”
GE confirmed in January that it wanted to sell the unit and expected closing in the third quarter of this year.
Profits had dropped sharply in the wake of higher benzene feedstock costs. A poor outlook for polycarbonate was another reason given by analysts for GE’s decision to sell.
SABIC is currently generating record profits with the global petrochemicals business at the peak of its cycle. First-quarter profits leaped 50% to a record Saudi riyal (SR) 6.3bn ($1.7bn).
Profits from GE Plastics dropped 45% in the quarter.
Segmental profit in the GE plastics business was $121m for the three months ended 31 March, down from $225m in the 2006 first quarter. Revenues came to $1.598bn, down from $1.644bn.
($1 = SR3.75)
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