21 May 2007 14:17 [Source: ICIS news]
By Nigel Davis
LONDON (ICIS news)--GE Plastics gives SABIC vitally important footholds in key automotive, consumer and industrial plastic markets as well as furthering the chemical giant's expanding global ambitions.
It is a huge step for the Saudi Arabian company in its globalisation and diversification efforts as the $11.8bn (€8.6bn) acquisition of GE's plastics arm, which was put up for sale last year, was sealed on Monday.
The acqusition marks another notch in SABIC's ambitions "to become one of the world’s leading manufacturing companies", said CEO Mohammed al-Mady.
"GE Plastics ...brings people, products and technology of significant value for our customers and our growth. The deal brings us a new market and 30,000 important customers worldwide,” he added.
SABIC won the race for the US-based plastics maker against stiff competition from private equity and from trade players. In the latter stages it was in the running for GE Plastics alongside privately-held polyolefins producer Basell.
Already the world’s largest chemical company by market capitalisation SABIC has sought greater product sophistication and global reach. By paying an estimate $1.6bn premium for the ?xml:namespace>
Added to the company’s purchase of DSM’s petrochemicals business in 2002 and last year the acquisition of Huntsman’s European petrochemicals assets, SABIC now has its much sought-after access to the
GE Plastics is a well established major player in the engineering thermoplastics (ETP) market, with a focus on automotive, electrical and electronic, glazing and lighting/furniture markets. It is currently targeting the healthcare market as a major area for growth. Sales in 2006 were $6.7bn, and operating profit $738m.
The company is regarded as strong on design and technology development but its attempts to streamline the supply chain through its now defunct Polymerland distribution unit led it to lose contact with customers’ needs, it admitted when it wound the unit up in 2005.
SABIC’s ambitions in polycarbonate, the largest GE Plastics business, have been well known. SABIC chief executive Al-Mady said before the World Economic Forum in
It will have its first polycarbonate production shortly through its stake in Kayan Petrochemicals, which is building a cracker complex in
SABIC’s global drive has appeared to focus on
GE Plastics specialises in film and sheet technologies, as well as producing injection moulding grades. Its workhorse Cycolac ABS, Lexan polycarbonate (PC) and Valox polybutylene terephthalate (PBT) polymers, and supported by its higher performance Noryl polyphenylene oxide (PPO) and Ultem polyetherimide (
It helped lead the development of ETP copolymer blends, such as PC/ABS, PC/PBT and PPO/polyamide, the former widely used in computer housings and keyboards, the latter in automotive bumpers and panels.
The company has been extending its footprint outside the
The plant will support GE Plastics’ PC compounding activities in
But the company has been challenged in recent years by high raw material costs and global oversupply in PC. It is also facing the trend to increasing commoditisation in the ETP area, with most major producers looking to cut back on technical service and support to cut costs and protect margins.
Al-Mady said in one Davos interview that SABIC plans to spend $23bn to increase total production by 49% to 73m tonnes/year by 2009. Its vision for 2020, however, lies more broadly downstream and in markets including China and India.
Following the Huntsman acquisition in 2006, SABIC said it would spend $150m (€110m) on the completion of a 400,000 tonne/year low density polyethylene (LDPE) unit at the operation’s
It also indicated that it wanted to buy a
Talks have continued with two potential cracker partners in
SABIC and Saudi Aramco might also pursue joint venture projects but no firm plans have emerged as yet.
The group’s move downstream, however, could prove pivotal. SABIC’s ambitions align with those of
Aramco is charged with fleshing out the expanding petrochemical industry in the kingdom but SABIC is expected to play its part in further developing the manufacturing base.
John Baker, editor of ICIS Chemical Business, contributed to this comment
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