Georgia Gulf Plans to Merge With PPG Unit, Ride Housing Recovery
07/19/2012| 01:14pm US/Eastern
By Doug Cameron
Georgia Gulf Corp. (>> Georgia Gulf Corporation) positioned itself for a recovery in the domestic housing market as the U.S. chemicals company disclosed plans to combine with a unit of PPG Industries Inc. (>> PPG Industries, Inc.) in a deal valued at $2.1 billion.
The proposed transaction would create one of the largest producers of chlor-alkalis, used to make PVC windows, pipes and sidings, as well as hydrochloric acid, where demand has surged because of its use in extracting shale gas.
The complex deal comes after Atlanta-based Georgia Gulf shrugged off an unsolicited $1.3 billion offer earlier this year from larger rival Westlake Chemical Corp. (>> Westlake Chemical Corporation), and continues a wave of deal-making in the sector as companies target niches and shed commodity assets.
Paul Carrico, Georgia Gulf's chief executive, said during an interview that overseas housing markets are still reliant on U.S. exports for PVC-derived building products, cushioning the impact of still-sluggish domestic conditions. The U.S. chemical sector is enjoying a renaissance as cheap natural gas lowers input costs and boosts the competitiveness in export markets.
"The rest of the world doesn't have to grow very much to be somewhat dependant on North America," said Mr. Carrico, who would lead the new company. The proposed deal is subject to shareholder and regulatory approval and slated to close by early next year.
This week, Missouri-based Olin Corp. (>> Olin Corporation) agreed to pay $328 million in cash for Illinois-based K.A Steel Chemicals Inc. to expand its chlor-alkali business.
The latest transaction would involve PPG spinning off or selling its commodity-chemicals business through a tax-free structure in return for a 50.5% stake in an enlarged entity with annual revenue of $5 billion, which Mr. Carrico said may be rebranded.
Pittsburgh-based PPG has spent several years looking for a way to focus on its business making coatings for the transport and manufacturing sectors and other specialty chemicals, following the path taken by others such as Dow Chemical Co. (>> The Dow Chemical Company) by shedding lower-margin units.
PPG would receive $900 million in cash, and executives said they would look for acquisitions in the coating sector.
The transaction values Georgia Gulf shares at $28.85 apiece, and the stock was recently up 16.6% at $33.63.
PPG shares were up 5.5% at $109.95 as the company also reported a second-quarter profit of $362 million compared with $340 million a year earlier. Per-share earnings rose to $2.34 from $2.12 a share.
Write to Doug Cameron at firstname.lastname@example.org.
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