UpdateUS Georgia Gulf rejects unsolicited takeover bid by Westlake

17 January 2012 13:13  [Source: ICIS news]

(recast to include Westlake response)

(adds background information and additional factors on why takeover bid was rejected)

Westlake Chemical has made a $30/share (€23/share) bid to acquire all outstanding shares of Georgia Gulf, the US chemicals firm said on Friday. LONDON (ICIS)--Georgia Gulf’s board of directors has rejected an unsolicited takeover bid by fellow US-based Westlake Chemical, as it is “financially inadequate” and not in the best interest of its shareholders, the producer said late on Monday.

On 13 January, Westlake made a $30/share (€23/share) bid valued at more than $1bn (€780m) to acquire all outstanding shares of Georgia Gulf. Westlake first approached Georgia Gulf on 20 September with its proposal.

“After careful consideration, Georgia Gulf’s board determined that Westlake’s proposal is financially inadequate and not in the best interest of Georgia Gulf stockholders,” said Paul Carrico, Georgia Gulf’s president and CEO.

Carrico described the bid as “an opportunistic attempt to acquire the company’s uniquely positioned assets as we recover from an unprecedented downturn”, adding that the proposal deprived Georgia Gulf’s stockholders of the “company’s inherent value”.

Georgia Gulf had nearly 34m outstanding shares, according to a regulatory filing made in March, 2011.

Westlake said on Friday last week that its bid reflected a 51% premium to Georgia Gulf’s 30-day volume-weighted average share price of $19.82, and a 66% premium to Georgia Gulf’s volume-weighted average closing share price of $18.02 since the initial offer from 20 September.

Westlake, which already holds 4.8% of Georgia Gulf’s shares, said its all-cash proposal was not subject to financing conditions.

The company said it had sent a letter to Georgia Gulf’s board, urging the board “to act in the best interests of its shareholders by meeting with us to seriously discuss our compelling proposal".

In response, Georgia Gulf on Monday sent a letter to Albert Chao, president and CEO of Westlake, listing a number of factors for rejecting the proposal.

Georgia Gulf said at the time of Westlake’s initial approach in September, the public market valuation of the company was an “aberration driven by the global economic uncertainty taking place during the third and fourth quarters of 2011”, with its share price having contracted 54% compared with its 52-week high of $40.59 per share just a few months earlier.

It added that market valuations in company’s industry have begun to recover, “with Georgia Gulf’s share price appreciating over 30% since you made your initial proposal,”.

“We believe the Westlake proposal undervalues the company by failing to acknowledge Georgia Gulf's significant ability to leverage improving global PVC (polyvinyl chloride) demand and its access to comparatively low-cost US shale gas,” it said.

Georgia Gulf’s board added Westlake’s proposal “is not compelling by any metric,” and that the proposal only reflects only a 23% premium to Georgia Gulf’s trading price of $24.48 per share on the last trading day prior to Westlake’s public proposal and represents a discount of 26% to the group’s 52-week high.

In addition, the company said the statements in Westlake’s letter on 13 January that Georgia Gulf was unwilling to provide information or enter into substantive discussions were untrue, adding that it had been willing to engage in discussions, provided Westlake signed a customary confidentiality agreement.

Georgia Gulf said Westlake “refused to sign the agreement and were unable or unwilling to provide a coherent reason why”.

“Simply put, it was Westlake’s refusal to enter into a standard confidentiality agreement that prevented discussions from moving forward. We now believe that Westlake’s plan all along was simply to take advantage of Georgia Gulf’s temporarily depressed share price, as demonstrated by Westlake’s accumulation of a large position in Georgia Gulf’s common stock,” the company said.

Saying it made a “fair and compelling proposal”, Westlake on Tuesday urged Georgia Gulf shareholders to “make it clear to Georgia Gulf’s board that they should immediately begin negotiations with us about getting a transaction done”.

Additional reporting by Graeme Paterson

($1 = €0.79)

By: Franco Capaldo
+44 (0)20 8652 3214

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