19 July 2012 15:54 [Source: ICIS news]
HOUSTON (ICIS)--Synergies from ?xml:namespace>
Under the $2.1bn (€1.7bn) deal, as announced earlier on Thursday, PPG will separate its commodity chemicals business and then merge it with
Georgia Gulf CEO Paul Carrico and PPG CEO Charles Bunch told analysts in a conference call that the combined company would have enhanced vertical integration with significant
“Approximately 70% integration to natural gas-fired cogeneration will make the combined company one of the lowest cost integrated chlor-alkali producers in the world,” Carrico said.
The vertical integration would enhance plant operating rates, he added.
“This is a unique opportunity to do something together that neither company really could have achieved on its own,” Carrico said.
“I have been in the chemicals industry for over 30 years and never seen a better opportunity to bring together such strong assets and talented people,” he said.
The combined company is expected to achieve some $115m in annualised cost synergies within two years, he said.
About $40m/year in savings would come from the companies’ combined $1bn/year purchases of ethylene and natural gas, he said.
The optimisation of plant operating rates would yield $35m/year in savings, and reductions in overheads and other expenses would come to an estimated $40m/year, he said.
Carrico pointed in particular to the
“This transaction allows us to fully optimise the
Carrico said at this time plans for the new company were primarily focused on synergies from the chlor-alkali integration, rather than the ethylene side of the business.
Nevertheless, the combined company will also be well-positioned to participate in North American ethylene expansion, he said.
“We still plan to look at [ethylene] and work our way through that during the next several years as all of the large amount of capacity comes on,” Carrico said.
He did not directly respond to an analyst who asked why the merger with PPG was a better deal for
PPG CEO Charles Bunch said that from PPG’s point of view, the transaction offers important tax advantages as it is structured as a “Reverse Morris Trust”.
“This is important, as the commodity chemicals business has a very low tax basis, and other potential transactions would have created significant taxes that would have diluted shareholder value,” Bunch said.
($1 = €0.82)
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