UpdateSolvay shares rise on PVC JV announcement with INEOS

07 May 2013 11:22  [Source: ICIS news]

LONDON (ICIS)--Solvay’s shares rose on Tuesday after it was announced the Belgium-based chemicals producer has signed a letter of intent with Switzerland-headquartered INEOS to combine their chlorvinyls businesses into a 50:50 joint venture.

If the joint venture does go ahead, it will be one of the largest polyvinyl chloride (PVC) producers in the world.

At 09:28 GMT, Solvay’s shares on the Brussels stock exchange were at €118.25 ($155), up by 5.39% from the previous change. INEOS is a privately owned company.

Analysts at investment bank JP Morgan Cazenove said the major vinyls restructuring announced today should allow focus on longer term growth. The analysts added the joint venture is expected to improve Solvay's recurring earnings before interest, taxes, depreciation and amortisation (REBITDA) margin by 170 base points, from 16.6% to 18.3% based on 2012 figures.

INEOS chairman Jim Ratcliffe in a statement said the newly combined business will be able to better respond to rapidly changing European markets, while Solvay CEO Jean-Pierre Clamadieu said the joint venture will improve the competitiveness of its operations in a “very challenging environment regarding feedstock and energy costs in Europe.”

The merged business would have combined net sales of €4.3bn and REBITDA of €257m, based on figures in 2012.

Solvay is to provide its vinyl activities and its Chlor Chemicals business, while INEOS subsidiary Kerling, Europe’s largest PVC producer, is to contribute its chlorvinyls business to the joint venture. RusVinyl, Solvay’s chlorvinyls joint venture with Russian chemical company SIBUR, is not included in the transaction.

Until the deal is closed, Solvay and INEOS will continue to run their chlorvinyls businesses separately, the companies said. The transaction is subject to anti-trust approvals, and a timeline for the completion of the deal was not disclosed.

($1 = €0.76)

Additional reporting by Tom Brown

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

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