INEOS
PVC joint venture with Solvay / Combined projected sales of EUR 4.3 bn / Potential to be in the global top three
 Jim Ratcliffe (left) and Jean-Pierre Clamadieu (Photos: Ineos/Solvay) |
With a mere signing on the dotted line on Tuesday, two Central European companies, Solvay (Brussels /Belgium; www.solvay.com) and Ineos (Rolle /Switzerland; www.ineos.com) inked a deal to combine their European chlorvinyls activities into a proposed 50/50 joint venture with pro forma net sales of EUR 4.3 billion. It would also rank the new fusion among the top three polyvinyl chloride (PVC) producers worldwide. These activities includes Solvay’s production of PVC resins in its joint venture SolVin (www.solvayplastics.com), where it has a 75% stake and German chemicals giant BASF (Ludwigshafen; www.basf.com) owning the remaining 25%.
"This agreement will result in the creation of a truly competitive and sustainable business one that is of world scale," said Jim Ratcliffe, chairman at Ineos, adding, “the new venture will be able to better respond to rapidly changing European markets and to match increasing competition from global producers."
According to PIE’s Polyglobe (www.polyglobe.net), the combined total output comes to 3.2m t/y of PVC and almost approximately as much of the feedstock VCM. In addition, Solvay brings its small cracker at French site Feyzin to the JV table, where it has a 42.5 stake in the facility jointly run with French petrochemicals giant Total(Paris; www.total.com)
In a joint statement released by the two companies, in addition to a potential REBITDA of EUR 257m based on 2012 figures, the deal would also bring together around 5,650 employees in nine countries and would pool each company's assets across the entire chlorvinyls chain, including PVC, caustic soda and chlorine derivatives. As for the well-known current European overcapacities, the newly created company would not necessarily mean that any plant closings are envisaged in the near future.
In that respect, Ineos had “already taken the necessary measures” said Solvay’s CEO, Jean-Pierre Clamadieu, referring to his company’s decision to shut down production at its British site in Runcorn – see Plasteurope.com from 21.01.2013.
Interestingly, RusVinyl, Solvay's planned joint venture in chlorvinyls with Russia's largest petrochemical provider Sibur, (Moscow; www.sibur.ru) is excluded from the arrangement. "We fully intend to go ahead with our plans for the partnership including all planned investments," assured Clamadieu.
With regard to Brazilian subsidiary Solvay Indupa (Sao Paulo; www.solvayindupa.com) where more than 500,000 t/y of VCM/PVC are produced at Santo André and Bahia Blanca combined, the company announced in February that it was planning to divest of its South American business. It would seem that discussions with potential investors are already underway – see Plasteurope.com from 19.02.2013
Meanwhile back in Europe, the planned fusion will first have to wait for approval from the European competition authorities in Brussels. Until then, the two companies will continue transacting business independent of one another, going about their respective PVC businesses separately. Both companies are naturally putting on the appearance of confidence with respect to the anticipated fusion going through; however, a little bit of scepticism that the deal will be easily “greenlighted” exists among industry experts.
This is especially clear given that from West European total capacities of roughly 6.4m t/y, approximately 50% would be produced by the newly formed entity and thus the JV could be considered a dominant position especially in light of the overall difficulties third largest producer Kem One (Lyon / France; www.kemone.com) is dealing with not to mention facing an uncertain future – see Plasteurope.com from 28.03.2013.
For the moment, what is absolutely certain is that Solvay is entitled to receive upfront cash payments of EUR 250 million upon completion of the JV transaction. Additionally, the LOI signed by both Clamadieu and Ratcliff provides exit mechanisms with Ineos acquiring Solvay's 50% interest in the joint venture for a value based on a mid-cycle REBITDA multiplied by 5.5. The joint press release notes that the JV terms also state the exit arrangements would have to be exercised 4-6 years following the joint venture's formation, after which Ineos would be the sole owner of the business.
With the estimated sales proceeds of over EUR 1 bn Solvay intends to accelerate the transformation of its high-margin products portfolio. However, Clamadieu remains silent with regard to any potential takeover goals his company may be planning in the near future.
What is clear is that Solvay plans to meet with BASF to in the coming months to discuss the 25% share that BASF owns in SolVin. Responding to a Plasteurope.com query about the JV deal and additional interested parties, Clamadieu stated that BASF “supports the venture.” Indeed, a spokesperson from the Ludwigshafen-based company told Plasteurope.com that they are, in fact, having discussions with Solvay about the JV.
"This agreement will result in the creation of a truly competitive and sustainable business one that is of world scale," said Jim Ratcliffe, chairman at Ineos, adding, “the new venture will be able to better respond to rapidly changing European markets and to match increasing competition from global producers."
According to PIE’s Polyglobe (www.polyglobe.net), the combined total output comes to 3.2m t/y of PVC and almost approximately as much of the feedstock VCM. In addition, Solvay brings its small cracker at French site Feyzin to the JV table, where it has a 42.5 stake in the facility jointly run with French petrochemicals giant Total(Paris; www.total.com)
In a joint statement released by the two companies, in addition to a potential REBITDA of EUR 257m based on 2012 figures, the deal would also bring together around 5,650 employees in nine countries and would pool each company's assets across the entire chlorvinyls chain, including PVC, caustic soda and chlorine derivatives. As for the well-known current European overcapacities, the newly created company would not necessarily mean that any plant closings are envisaged in the near future.
In that respect, Ineos had “already taken the necessary measures” said Solvay’s CEO, Jean-Pierre Clamadieu, referring to his company’s decision to shut down production at its British site in Runcorn – see Plasteurope.com from 21.01.2013.
Interestingly, RusVinyl, Solvay's planned joint venture in chlorvinyls with Russia's largest petrochemical provider Sibur, (Moscow; www.sibur.ru) is excluded from the arrangement. "We fully intend to go ahead with our plans for the partnership including all planned investments," assured Clamadieu.
With regard to Brazilian subsidiary Solvay Indupa (Sao Paulo; www.solvayindupa.com) where more than 500,000 t/y of VCM/PVC are produced at Santo André and Bahia Blanca combined, the company announced in February that it was planning to divest of its South American business. It would seem that discussions with potential investors are already underway – see Plasteurope.com from 19.02.2013
Meanwhile back in Europe, the planned fusion will first have to wait for approval from the European competition authorities in Brussels. Until then, the two companies will continue transacting business independent of one another, going about their respective PVC businesses separately. Both companies are naturally putting on the appearance of confidence with respect to the anticipated fusion going through; however, a little bit of scepticism that the deal will be easily “greenlighted” exists among industry experts.
This is especially clear given that from West European total capacities of roughly 6.4m t/y, approximately 50% would be produced by the newly formed entity and thus the JV could be considered a dominant position especially in light of the overall difficulties third largest producer Kem One (Lyon / France; www.kemone.com) is dealing with not to mention facing an uncertain future – see Plasteurope.com from 28.03.2013.
For the moment, what is absolutely certain is that Solvay is entitled to receive upfront cash payments of EUR 250 million upon completion of the JV transaction. Additionally, the LOI signed by both Clamadieu and Ratcliff provides exit mechanisms with Ineos acquiring Solvay's 50% interest in the joint venture for a value based on a mid-cycle REBITDA multiplied by 5.5. The joint press release notes that the JV terms also state the exit arrangements would have to be exercised 4-6 years following the joint venture's formation, after which Ineos would be the sole owner of the business.
With the estimated sales proceeds of over EUR 1 bn Solvay intends to accelerate the transformation of its high-margin products portfolio. However, Clamadieu remains silent with regard to any potential takeover goals his company may be planning in the near future.
What is clear is that Solvay plans to meet with BASF to in the coming months to discuss the 25% share that BASF owns in SolVin. Responding to a Plasteurope.com query about the JV deal and additional interested parties, Clamadieu stated that BASF “supports the venture.” Indeed, a spokesperson from the Ludwigshafen-based company told Plasteurope.com that they are, in fact, having discussions with Solvay about the JV.
08.05.2013 Plasteurope.com [225275-0]
Published on 08.05.2013
German version of this article...