PVC producer Georgia Gulf (Atlanta, Georgia / USA; www.ggc.com) is to purchase the commodity chemicals business of industrial coatings group PPG Industries (Pittsburgh, Pennsylvania / USA; www.ppg.com). The transaction, valued at USD 2.1 bn (EUR 1.7 bn), will make Georgia Gulf North America’s second largest VCM producer and third largest chlor-alkali producer. It follows Georgia Gulf’s rejection of a hostile takeover bid by rival Westlake Chemical (Houston, Texas / USA; www.westlake.com) earlier this year – see Plasteurope.com of 08.05.2012.

Paul Carrico, president and CEO of Georgia Gulf, said the deal will enhance the company’s vertical integration with US natural gas-driven chlor-alkali production. “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,” he stated. “Approximately 70% integration to natural gas-fired cogeneration will make the combined company one of the lowest cost integrated chlor-alkali producers in the world.” The transaction, which is expected to be completed in late 2012 or early 2013, will create a company with revenues of approximately USD 5 bn and 6,400 employees, with more than 40 facilities, primarily in North America.

PPG said the divestment will allow it to focus on coatings and specialty products. “This 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 repayment and PPG share repurchases,” stated PPG Chairman and CEO Charles E. Bunch.

PPG will spin or split off the business and then immediately merge it with Georgia Gulf through a deal known as a ‘Reverse Morris Trust’ transaction, which is tax efficient for the companies. The merger will result in PPG shareholders receiving approximately 50.5% of the shares of the merged company, with Georgia Gulf shareholders owning the remainder. The USD 2.1 bn valuation consists of USD 900m in cash paid to PPG and the assumption of USD 95m of debt, with Georgia Gulf taking a minority interest of USD 87m in PPG. PPG shareholders will receive about 50.5% of the new company, valued at USD 1 bn based on Georgia Gulf’s closing stock price on 18 July.

Georgia Gulf will become North America’s third largest chlor-alkali producer after Dow Chemical in first place and Occidental in second place, and will become the region’s second largest VCM producer after Occidental, according to CMAI data presented by Georgia Gulf.