OpenGate Looks for Purchases to Strengthen PVC Windows Business

OpenGate Capital LLC plans to make acquisitions to expand the PVC windows and shutter-components business it bought from Tessenderlo Chemie NV and will consider spending to move deeper into the chemicals industry.

OpenGate acquired Profialis this month and the Los Angeles- based investment firm will use it as a base to expand in the Benelux region and other parts of Europe, a market that has high barriers to entry because of expenditure needs and consumer tastes, Sebastien Kiekert Le Moult, a European partner at OpenGate, said in a phone interview from Paris.

By acquiring Profialis, OpenGate is betting that Europe’s construction industry will recover from a slump that’s affecting results at companies spanning paintmaker Akzo Nobel NV (AKZA) to adhesive and concrete-additive maker BASF SE. (BAS) The slowdown is prompting companies to review holdings, with Arkema SA (AKE) and Tessenderlo among those opting to divest PVC-related businesses.

“There’s a lot of activity in PVC and in the chemical industry generally,” said Kiekert Le Moult, who previously worked at Sun European Partners, the European arm of Sun Capital Partners Inc. “It’s good timing for investing in this industry. The recession can last only so long.”

Makers of polyvinyl chloride and related chemicals, used in construction products and packaging, are consolidating to tackle high costs of raw materials. Asian and U.S. companies, bolstered by supplies of shale gas, have expanded production to satisfy local demand.

Improving Production

Belgium’s Solvay SA (SOLB) remains in the PVC business, even as “anaemic demand in the European construction sector” has led to weak capacity utilisation, Stephan Kippe, an analyst at Commerzbank, said in a note today. Solvay’s plastics business probably saw third-quarter earnings drop by 17 percent, he said.

The European PVC windows business is relatively insulated as the products don’t “travel well,” Kiekert Le Moult said.

Any bolt-on target to add to Profialis would have to offer savings with existing operations, the executive said. OpenGate’s strategy is focused on improving production and expanding businesses through purchases, without a specific timing for selling-on assets.

“It’s not timing so much, but a question of finding the right asset,” Kiekert Le Moult said.

To contact the reporter on this story: Andrew Noel in London at anoel@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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