Westlake Makes Hostile $2.9 Billion Bid For PVC Rival Axiall

Intent on building a back-integrated vinyls powerhouse, Westlake Chemical has made a $2.9 billion hostile bid to buy rival Axiall. Axiall’s board quickly rejected the bid, which is valued at more than twice the $9.60 closing price of Axiall’s stock on Jan. 22.

The board said Westlake’s offer “significantly undervalues Axiall’s assets and long-term prospects.” However, Brigade Capital Management, which owns 2% of Axiall’s shares, is urging the board to give “very serious consideration” to a potential sale of the company.

Brigade says the combination of Westlake and Axiall “is logical” at the right price and that it is disappointed Axiall did not engage in substantive discussions. At press time, Axiall had no comment on Brigade’s action.

The Westlake offer builds on strong 2015 merger and acquisition activity in the chemical sector, which notably saw Dow Chemical and DuPont announce plans to hook up. They were urged on by investors such as Trian Fund Management and Third Point. According to a just-released study on chemical industry merger trends from consulting firm Deloitte, companies are increasing focus on their core strengths and expect acquisitions will deliver growth and shareholder value.

In an open letter to Axiall and its shareholders, Westlake CEO Albert Chao argues that the combination of the two firms would create “a more efficient, diversified, and competitive company.” Benefits would include backward integration into feedstock ethylene crackers operated by Westlake and a vinyls outlet in Europe through Vinnolit, which Westlake acquired in 2014.

Westlake had similar designs in the past. 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 in 2013 to form Axiall.