Westlake Chemical to buy PVC rival Axiall

After months of wrangling, Axiall has accepted a sweetened all-cash $3.8 billion takeover offer from rival Westlake Chemical that will create the second-largest PVC producer in North America. The deal ends Westlake’s battle to replace Axiall’s board of directors and trumps an eleventh-hour bid for Axiall from South Korea’s Lotte Chemical.

Directors at both companies have approved the deal, which they expect will be completed by the end of this year, pending regulatory and Axiall shareholder approvals.

The deal will create a company that would have had sales of $7.6 billion and earnings of $1.5 billion for the 12 months ending March 31. The new firm will be the second-largest North American PVC producer after Shintech and the third-largest chlor-alkali maker after Olin and Occidental Chemical. Westlake says it expects to save $100 million annually by combining the two firms.

“This transaction aligns two remarkable companies, creates a company with greater financial and operation flexibility, and accelerates our growth strategy,” says Westlake CEO Albert Chao.

Lotte, which reportedly made a $2.6 billion-plus bid for Axiall on June 6, is not entirely out of the picture. Westlake says it looks forward to working with Lotte on an ethylene joint venture in Lake Charles, La., previously announced by Axiall and Lotte.

The agreement between Westlake and Axiall ends a fight that began in January when Westlake made an unsolicited $2.9 billion takeover offer. Axiall rejected the bid as inadequate, and Westlake responded by nominating its own slate of directors to stand for election at Axiall’s annual meeting. In April Westlake raised its offer to $3.1 billion to no avail. The increase to $3.8 billion did the trick.

The deal brings to fruition a four-year effort by Westlake to integrate with its rival. In 2012, Westlake made a bid to buy Axiall predecessor Georgia Gulf for $1.2 billion, but discussions fell through. Georgia Gulf subsequently merged with PPG Industries’ chlor-alkali operations to form Axiall. Now that a deal is signed, Westlake will get more than it had initially bargained for.