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OpenGate Capital And Partner Buy Distressed French Vinyls Maker Kem One

Plastics: Investors preserve status quo in oversupplied market

by Marc S. Reisch
January 6, 2014 | A version of this story appeared in Volume 92, Issue 1

Credit: MAXPPP/Newscom
Union workers in Lyon, France, await court’s decision on sale of Kem One.
Photo of Kem One employees protesting in front of the Lyon Commerce Tribunal.
Credit: MAXPPP/Newscom
Union workers in Lyon, France, await court’s decision on sale of Kem One.

A French court has approved the sale of the vinyls maker Kem One to a pair of private investors. The deal will preserve Europe’s third-largest producer of chlorine and polyvinyl chloride, but it doesn’t address overcapacity in the region’s vinyl industry.

Eight groups bid for Kem One, which has been in bankruptcy reorganization since March 2013. One bid came from French labor union CGT in an effort to save jobs. In the end, the bankruptcy court accepted a joint $14 million bid, which also preserves jobs. That bid came from the California-based private equity firm OpenGate Capital and investor Alain de Krassny, who runs the Austrian chemical company Donau Chemie.

Kem One employs 1,300 workers at six sites in France and a plant in Spain. It has annual sales of about $1.1 billion. A related business making PVC building materials is not part of the sale, but the partners have an option to buy it for a euro.

For OpenGate, the acquisition of Kem One follows soon after its purchase of two other vinyl-related companies in Europe: building products maker Profialis and PVC compounder Benvic. “We see tremendous potential in the business and synergies with our other PVC businesses,” says OpenGate CEO Andrew Nikou.

OpenGate and de Krassny will get a hand from the French government and raw materials suppliers. According to French press reports, government authorities will make millions of dollars in loans and grants to Kem One. Suppliers such as Total and LyondellBasell Industries will provide breaks on power and feedstocks. Arkema, which owned Kem One until July 2012, says it will waive claims against the firm and rehire 100 employees.

However, observers wonder whether the problems that forced Kem One into bankruptcy will continue to haunt the company. “This deal doesn’t address the fundamental overcapacity problem in the European vinyl industry,” observes Henry Warren, vinyls analyst at market research firm IHS Consulting.

Also in the works is the merger of the PVC operations of Europe’s top two producers, Ineos and Solvay. Both have pledged not to close plants. “In an ideal world,” Warren says, “if Kem One were to disappear, the European PVC market would be in balance.”



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