PPG-Georgia Gulf deal to create synergies for both - source

19 July 2012 22:25  [Source: ICIS news]

HOUSTON (ICIS)--The $2.1bn (€1.72bn) deal by which PPG Industries will separate its commodity chemicals business and merge it with Georgia Gulf should provide some synergies for both companies, one market participant said on Thursday.

The two US-based firms said that when the transaction is completed, either later this year or in early 2013, the combined company is expected to have annual revenues of around $5bn and be the third-largest chlor-alkali producer and second-largest vinyl chloride monomer producer in North America.

The deal consists mainly of the payment of $900m cash to PPG and the assumption of approximately $95m of debt by Georgia Gulf and the issue of $1.0bn worth of Georgia Gulf shares to PPG shareholders. The shares' valuation is based on Georgia Gulf’s closing stock price on 18 July, according to the two companies. The deal also includes about $87m of minority interest.

A market participant at a competing US chlor-alkali producer said the announcement was not surprising, given that it was known that PPG had been shopping around its commodity chemical assets for several years.

It was not until now that PPG was able to get the price it wanted, the source said.

“This is a big deal; this will be quite impactful,” the source said, adding that it was still very early after the announcement to talk in detail about the merger's effects.

Still, the source said, the transaction will create synergies for both companies.

Georgia Gulf's acquisition of PPG’s chlor-alkali assets, particularly its facility in Lake Charles, Louisiana, gives the company its first opportunity to enter the chlorine merchant market.

The source said the transaction is not likely to put more product in the market and will simply create a new stream for PPG’s existing chlor-alkali facilities.

A market participant in Mexico said it saw no immediate changes in the polyvinyl chloride (PVC) business in that country as the transaction will not be finalised for some months, at least.

Sources in Mexico said the merger should help Georgia Gulf, which in the past has been the subject of takeover attempts. Earlier this year, Houston-based Westlake made a takeover bid, which it ultimately withdrew.

Market participants in Mexico said there was concern that the merger will reduce competition among suppliers and could lead to higher prices for chlorine derivatives and caustic soda.

 

Additional reporting by Franco Capaldo and Ronald Coifman.

 

($1 = €0.82)

 

Follow Ken Fountain on Twitter (@ICIS_Ken).
 


By: Ken Fountain



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