By Doug Cameron
Georgia Gulf Corp. (GGC) positioned itself for a recovery in the
domestic housing market as the U.S. chemicals company disclosed
plans to combine with a unit of PPG Industries Inc. (PPG) in a deal
valued at $2.1 billion.
The proposed transaction would create one of the largest
producers of chlor-alkalis, used to make PVC windows, pipes and
sidings, as well as hydrochloric acid, where demand has surged
because of its use in extracting shale gas.
The complex deal comes after Atlanta-based Georgia Gulf shrugged
off an unsolicited $1.3 billion offer earlier this year from larger
rival Westlake Chemical Corp. (WLK), and continues a wave of
deal-making in the sector as companies target niches and shed
commodity assets.
Paul Carrico, Georgia Gulf's chief executive, said during an
interview that overseas housing markets are still reliant on U.S.
exports for PVC-derived building products, cushioning the impact of
still-sluggish domestic conditions. The U.S. chemical sector is
enjoying a renaissance as cheap natural gas lowers input costs and
boosts the competitiveness in export markets.
"The rest of the world doesn't have to grow very much to be
somewhat dependant on North America," said Mr. Carrico, who would
lead the new company. The proposed deal is subject to shareholder
and regulatory approval and slated to close by early next year.
This week, Missouri-based Olin Corp. (OLN) agreed to pay $328
million in cash for Illinois-based K.A Steel Chemicals Inc. to
expand its chlor-alkali business.
The latest transaction would involve PPG spinning off or selling
its commodity-chemicals business through a tax-free structure in
return for a 50.5% stake in an enlarged entity with annual revenue
of $5 billion, which Mr. Carrico said may be rebranded.
Pittsburgh-based PPG has spent several years looking for a way
to focus on its business making coatings for the transport and
manufacturing sectors and other specialty chemicals, following the
path taken by others such as Dow Chemical Co. (DOW) by shedding
lower-margin units.
PPG would receive $900 million in cash, and executives said they
would look for acquisitions in the coating sector.
The transaction values Georgia Gulf shares at $28.85 apiece, and
the stock was recently up 16.6% at $33.63.
PPG shares were up 5.5% at $109.95 as the company also reported
a second-quarter profit of $362 million compared with $340 million
a year earlier. Per-share earnings rose to $2.34 from $2.12 a
share.
Write to Doug Cameron at doug.cameron@dowjones.com.
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