(Karen Wink / American Press)
(Karen Wink / American Press)
Last Modified: Saturday, July 21, 2012 6:22 PM
A deal was announced Thursday that will make Georgia Gulf one of the largest chlor-alkali and vinyl chloride monomer producers in North America.
Months after Georgia Gulf, based in Atlanta, fended off a hostile takeover by Westlake Chemicals, company officials announced they were buying PPG’s commodity chemicals business for $2.1 billion.
According to a statement from both companies, a new corporate entity will be formed that will manage Georgia Gulf’s 40 industrial facilities and five PPG plants — including the one located in Lake Charles.
“Basically, we will be out of the chemicals business. For the time being, until the deal closes, it will be business as usual in Lake Charles. Once the deal is closed, operations there will transfer to the newly merged company. This will affect PPG’s operations in Lake Charles. It won’t be PPG industries anymore,” PPG spokesman Jeremy Neuhart told the newspaper.
The transaction is expected to be completed later this year or during the start of 2013.
Local PPG employees learned of the deal Thursday morning.
Alan Chapple, spokesman for Georgia Gulf, said the deal will create a new Fortune 500 company that will be a leader in the production of chemicals and building products.
“Down the road, we will probably call ourselves something different. We are looking at naming the company. Something that catches the essence of a strong company and emphasizes the importance of the products we will produce,” he said.
He said the venture will bring together the companies’ Lake Charles operations. “And that will give us greater access to world markets. It is a win for everybody, the companies and Lake Charles,” he said.
Chapple noted that Georgia Gulf has wanted to obtain access to chlorine, which PPG Lake Charles produces.
Georgia Gulf’s website said vinyl is used to make building and home improvement products, along with siding, pipe and fittings, mouldings, trim, decking, columns and window coverings.
A local union official said no workers would lose their jobs because of the deal and that labor leaders would meet with PPG for scheduled contract negotiations next month.
“We plan to stay online and begin negotiations Aug. 1. We have successorship language in our current contract that addresses sales and mergers that says our contract will be honored” by the new company, said Craig Martin, directing business representative for International Association of Machinists District 161, based in Lake Charles. “It’s basically just a switch of hard hats. It’s work as usual.”
The union represents 800-plus PPG workers, and the merger — which will reportedly create the continent’s third-largest chlor-alkali producer — “should be a plus” for them, he said.
On the same day the purchase was announced, PPG reported that its commodity chemicals unit accounted for $427 million, or 11 percent, of the company’s total sales in the second quarter.
Agreeing to sell the chemical component will provide PPG funds to grow paint and coating operations.
“We think this is another major step for PPG Industries in our transformation into a more focused company. We also believe this deal is a unique opportunity to create significant value for stockholders in both companies,” Neuhart said.
PPG Chairman and CEO Charles Bunch said in a statement that the deal “further strengthens PPG’s already strong cash position and will provide us the opportunity to increase cash deployed for earnings-accretive activities such as acquisitions, organic growth initiatives, debt payment and PPG share repurchases. Finally, we intend to maintain our dividend, and our long heritage of increasing our annual dividend payout.”
Georgia Gulf President and CEO Paul Carrico said the merger will create a global industry giant.
“The combined company will be a leading integrated chemicals and building products company that we believe will benefit from significant integration and scale, a broad portfolio of downstream products, as well as the regional advantage of low-cost North American natural gas.”
According to the joint statement from Georgia Gulf and PPG, the merger will be led by Carrico, senior management officials from Georgia Gulf and PPG’s commodity chemicals representatives.
A new board of directors will be made up of eight current Georgia Gulf board members and three new members, which will be named by PPG.
The new company will consist of 6,400 employees.
Officials said the new company will generate $5 billion in revenues.
Wall Street responded to the deal’s announcement with PPG closing at $111.96, up 7.46 percent; Georgia Gulf closed at 32.68, up 13.24 percent