GE Plastics Will Be Sold To SABIC

General Electric has agreed to sell its plastics business to Saudi Basic Industries Corp. (SABIC) for $11.6 billion in cash plus the assumption of liabilities.

GE Plastics makes polycarbonate, acrylonitrile-butadiene-styrene, polybutylene terephthalate, polyphenylene ether, polyether imide, and other engineering plastics and specialty compounds. The Pittsfield, Mass.-based business generated $6.6 billion in sales and $675 million in profits in 2006 and employs 10,300 people.

SABIC has grown into one of the world's largest chemical companies by building enormous petrochemical plants based on cheap Saudi hydrocarbon feedstocks. Its sales last year were $23 billion. The company has been trying to diversify itself geographically and to broaden its product slate beyond ethylene derivatives such as ethylene glycol and polyethylene.

"This acquisition represents another important step in SABIC's growth and diversification to become one of the world's leading manufacturing companies," says SABIC CEO Mohamed Al-Mady. "This business is complementary to our existing business without any overlaps."

SABIC purchased DSM's petrochemicals business in 2002 and completed the acquisition of Huntsman's U.K.-based petrochemicals business in January. The company is also a major partner in Saudi Kayan Petrochemical, which is building phenol, cumene, and polycarbonate plants in Al-Jubayl, Saudi Arabia.

GE Plastics is one of GE's oldest businesses, but in recent years, it has been grappling with anemic growth, profitability that lags behind other GE businesses, and high price volatility for raw materials, particularly benzene. "Over the past five years, we have transformed our portfolio of businesses through smart dispositions and investments in higher growth, higher technology businesses," says GE CEO Jeffrey R. Immelt. "This transaction is another important step in the execution of this strategy."

The sale of GE Plastics is expected to be completed in the third quarter of this year, following regulatory approvals. GE says it will use the roughly $9 billion in proceeds from the sale for a stock buyback program.

Last year, GE sold its silicones and quartz business to Apollo Management for $3.8 billion. The unit has since been renamed Momentive Performance Materials.