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Georgia Gulf Rebuffs Westlake

Plastics: Vinyls firm calls takeover offer ‘opportunistic’

by Alexander H. Tullo
January 23, 2012 | A version of this story appeared in Volume 90, Issue 4

Georgia Gulf’s shares spiked after Westlake revealed its bid on Jan. 13.NOTE: Data shown through Jan. 17.
A chart showing the stock price of Georgia Gulf in relation to Westlake's recent $30 per-share buyout offer.
Georgia Gulf’s shares spiked after Westlake revealed its bid on Jan. 13.NOTE: Data shown through Jan. 17.

Georgia Gulf has rejected an unsolicited $1 billion buyout offer from polyvinyl chloride rival Westlake Chemical.

The $30.00-per-share offer represents a premium of nearly 23% for Georgia Gulf’s shares over their market close on Jan. 12, the day before the offer was publicly disclosed. Westlake had been privately courting Georgia Gulf since last September.

Both Georgia Gulf and Westlake make chlorine, vinyl chloride, PVC, and PVC derivatives such as pipe, windows, and doors. Westlake earned $221 million on $3.2 billion in sales in 2010, whereas Georgia Gulf made $43 million on $2.8 billion in sales. Combined, the two firms would be the second-largest U.S. producer of PVC, after Shintech.

Recent years have been tumultuous for Georgia Gulf. It paid $1.6 billion for building products maker Royal Group Technologies in 2006, only to be hit soon thereafter by the housing downturn. In February 2009, the New York Stock Exchange warned the firm that it risked being delisted because its market capitalization had dipped below $75 million.

Georgia Gulf officials point out that the firm’s stock traded above $40.00 not long ago. “We believe the Westlake proposal is an opportunistic attempt to acquire the company’s uniquely positioned assets as we recover,” says Georgia Gulf CEO Paul D. Carrico.

Westlake retorts that its offer means cash to shareholders sooner rather than later. In a letter to Georgia Gulf’s board members, Westlake CEO Albert Chao chides the board for being “unwilling to discuss” a deal despite the possibility of providing “stockholders with immediate liquidity at a sizable premium in an uncertain economic environment.”

Since Jan. 13, Georgia Gulf stock has traded at $3.00 to $4.00 above Westlake’s bid, an indication that the company’s shareholders are looking for a better offer. “We would advise [Georgia Gulf ] shareholders to either wait for a higher offer or wait for the shares to attain levels more in line with the company’s earnings potential,” Charles Neivert, a stock analyst with Dahlman Rose & Co., told clients.



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