US Georgia Gulf merger with PPG commodity chems to close in spring

07 November 2012 18:47  [Source: ICIS news]

HOUSTON (ICIS)--US-based vinyls producer Georgia Gulf said on Wednesday that its merger with the commodity chemicals business of paint producer PPG Industries will be completed by the early spring of 2013.

The deal, announced in July, has already received necessary anti-monopoly approvals from US and Canadian regulators, said CEO Paul Carrico and Greg Thompson, chief financial officer. Other regulatory matters are being worked out, and the company is moving forward on the incorporation of PPG’s commodity-chemical assets.

Once the merger is complete, Georgia Gulf will be even better positioned in the chlor-alkali and aromatics sectors, Carrico said.

“In our view, we are really doing something special with this merger,” he said.

Following completion of the transaction, 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 transaction value of around $2.1bn consists of $900m of cash to be paid to PPG, approximately $95m of assumed debt, about $87m of minority interest, and Georgia Gulf shares to be received by PPG shareholders valued at $1.0bn based on Georgia Gulf’s closing stock price on 18 July, the companies said.

Annual cost savings of $115m from the combination are expected to be fully realised in the first two years, the companies added.

The merged company will be led by Georgia Gulf’s president and CEO Paul Carrico and a senior management team comprised of both Georgia Gulf and current PPG commodity chemicals employees. It will have approximately 6,400 employees working at more than 40 facilities, primarily in North America.

The executives were discussing the PPG deal during a conference call discussing Georgia Gulf’s third-quarter earnings. The company announced a third-quarter net income of $39.3m (€30.7m), up from $34.4m from the same time last year.

“These results represent the strongest quarterly results we’ve had in over a decade,” Carrico said.

Carrico said the company was able to take advantage of export demand for polyvinyl chloride (PVC) to increase sales volumes as prices fell on lower domestic demand, as well as increasing pricing for caustic soda and decreasing feedstock costs. Georgia Gulf’s operating rates were higher than the industry average, he said.

Responding to an analyst, Carrico said he expects a typical seasonal downturn in production through the end of 2012. But one “wild card” would be continuing export demand for resins, he said.

Discussions of previously announced price initiatives for caustic soda are continuing, he said, but that he expects that some proportion of the increase to be implemented.

Carrico also said that he anticipates that the homebuilding sector will continue its recent improvement in 2013. Home construction is a key downstream sector for resins such as PVC, as well as Georgia Gulf’s building products segment.

“That’s a pretty good feeling compared with what we’ve seen the last couple of years,” he said.

($1 = €0.78)

Follow Ken Fountain on Twitter (@ICIS_Ken)

By: Ken Fountain

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