INTERVIEW: Tech and feed key to SABIC deal

22 May 2007 01:09  [Source: ICIS news]

By Joseph Chang

NEW YORK (ICIS news)--Access to polymer technology and a reliable supply of raw materials are the key advantages of SABIC’s acquisition of GE Plastics, SABIC’s chief executive said in an interview on Monday.

“The greatest synergies are from the technologies and expertise GE Plastics can bring to our projects in Saudi Arabia, and also the benefits of R&D, particularly in polycarbonate,” SABIC’s Mohammed Al-Mady told ICIS news.

The polycarbonate (PC) technology and experience it acquired from GE Plastics will also help SABIC to expand its own production in Saudi Arabia aimed for the Asian market, with a planned 260,000 tonne polycarbonate facility.

The PC facility is part of the Kayan Petrochemical project, where SABIC has a 35% stake, Al-Mady said.

GE Plastics’ planned project with PetroChina to build a worldscale PC plant in China announced in June 2006 will be scrapped. The project had been put on hold in March 2007 pending the sale of GE Plastics.

“We don’t have any plans to build a polycarbonate plant in China because we are building a plant in Saudi Arabia which will serve the Chinese market,” said Al-Mady.

SABIC will also use the acrylonitrile-butadiene-styrene (ABS) capacity it acquired with GE Plastics within its own Petrokemya project.

“We can now use GE’s ABS technology in the Petrokemya plant,” said Al-Mady.

Kayan Petrochemical will make use of GE’s strong qualifications for distribution and marketing, Al-Mady said. Kayan has used selected PC technology from Asahi Glass in the past.

Firm benzene supply from SABIC to GE Plastics is also a key benefit, Al-Mady said. GE Plastics relies on Benzene as raw material for PC production.

“The GE Plastics operations can source benzene from SABIC Europe,” he said. “The biggest advantage of this would be the reliability of supply.”

According to Al-Mady, no major new acquisitions are planned for the Americas now as the company consolidates its purchase of GE Plastics.

On a global basis, Al-Mady did not rule out further acquisitions, but said the company will also focus on organic growth.

“We can never say we are finished with acquisitions,” he said. “We will focus on organic growth in and outside the Kingdom but if there is an opportunity that fits with our strategy, we will evaluate that.”

SABIC intends to finance its $11.6bn (€8.6bn) acquisition of GE Plastics with $8.7bn in bonds and bank debt, while the remainder will be paid in equity from SABIC.

Financing commitments are in place, and the company is in the process of securing those mandates, Al-Mady added.

The acquisition of GE Plastics should pass US political muster, Al-Mady said.

“SABIC is a global company and we’ve been in the US for 20 years,” he said. “We are welcoming US investment in Saudi Arabia and I’m sure the US will welcome a global company like SABIC.”

In 2006, Dubai Ports World backed away from its planned $6.8bn acquisition of a British port company that operated in six US cities after US congressional opposition.

SABIC beat out a number of strategic and private equity players to acquire GE Plastics for $11.6bn. The purchase includes some assumed liabilities, mainly related to employee benefits, Al-Mady said.

Look for the full story on SABIC’s acquisition of GE Plastics based on the exclusive trade media interview with Al-Mady in the 28 May issue of ICIS Chemical Business Americas.

By: Joseph Chang
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