Westlake Chemical Withdraws $1.2 Billion Georgia Gulf Offer

Westlake Chemical Corp. (WLK) withdrew its unsolicited $1.2 billion bid to buy Georgia Gulf Corp. (GGC), North America’s largest maker of vinyl construction products, after the sweetened offer was rejected as too low.

Westlake plans to sell its stake in Georgia Gulf “as market conditions permit,” Houston-based Westlake said today in a statement. Westlake said Jan. 13 it had acquired 4.8 percent of the other company. Georgia Gulf dropped 9.7 percent to $30.95 at 5:26 p.m. after the close of regular trading in New York.

Westlake Chief Executive Officer Albert Chao, whose family controls about 69 percent of the company, had offered $35 a share on Feb. 1, $5 more than the initial bid disclosed Jan. 13. Chao sought to combine the companies to create North America’s largest maker of vinyl chloride monomer, a chemical compound used in PVC pipe and vinyl siding.

“We are disappointed in this result but we continue to work on our previously announced important strategic initiatives as well as to look for other opportunities to grow our business,” Chao said in the statement.

Westlake is expanding production of ethylene and chlorine to take advantage of the lowest prices for U.S. natural gas in a decade. Chemical makers use gas as a raw material and to power plants.

Chao was overly optimistic that he could buy Georgia Gulf at a “cheap” price, Hassan Ahmed, a New York-based analyst at Alembic Global Advisors, said today in a phone interview. Westlake may decline on the failed bid because the acquisition would have added to earnings in the first year, he said.

‘Disciplined Guy’

“Albert is a very disciplined guy,” Ahmed said. “He withdrew thinking, ‘I’m not going to bid against myself.’”

Westlake has said it approached Georgia Gulf with its initial proposal on Sept. 30 and publicly disclosed the bid on Jan. 13. Atlanta-based Georgia Gulf said the initial and revised offers undervalued the company.

Georgia Gulf’s board thought the offer didn’t reflect the increased earnings that should come with a recovery in U.S. housing, Ahmed said. The shares dropped after the bid was withdrawn because demand from homebuilders remains weak, he said. Ahmed recommends buying shares of Westlake and doesn’t rate Georgia Gulf.

Georgia Gulf narrowly averted bankruptcy after acquiring building products maker Royal Group in 2006, at the start of the worst housing slump since the Great Depression. Georgia Gulf is now poised to post record annual sales, according to analysts’ estimates, as the U.S. housing market shows signs of stabilizing.

The value of the increased offer was calculated based on the 34.2 million shares of Georgia Gulf that were outstanding as of Feb. 21 according to data compiled by Bloomberg.

To contact the reporter on this story: Jack Kaskey in Houston at jkaskey@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net

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