Solvay, Ineos Said to Plan Site Sale for $5.7 Billion Merger

Solvay SA (SOLB) and Ineos Group Holdings, which plan to merge their European vinyl chloride assets in a 4.3 billion-euro ($5.7 billion) deal, may sell a German site to help win regulatory approval, according to people familiar with the matter.

Ineos’s site in Schkopau, with the capacity to make about 150,000 tons of PVC a year, may fetch about 60 million euros, said two of the people, who asked not to be identified because the plan isn’t public. The two companies are putting together a proposal that may be delivered to European Commission regulators this month in order to divest the plant this year, they said.

The merger of their vinyl chloride assets, announced in May, may allow the companies to cut costs in areas from transport to marketing and raise profitability at a commodity business suffering from inflated raw material and energy costs. The PVC industry is facing overcapacity and weak demand in Europe, contrasting with shortfalls in markets like India.

“We are making good progress in the planned creation of our chlorovinyls joint venture,” Lamia Narcisse, a Solvay spokeswoman, said in an e-mail. “It is possible that the European Commission will require us and Ineos to divest some plants in order for them to grant clearance.”

The two companies are looking at what remedies the commission may demand and the viability of each option, Narcisse said in an e-mail. Ineos declined to comment.

PVC Woes

Brussels-based Solvay, the world’s largest maker of guar-derived gelling agents used in hydraulic fracturing, plans to exit the PVC venture at a later stage.

Bidders for Schkopau will also have to budget for inflated raw material and energy costs that have soured prior investments in PVC.

The future of vinyl product producer Kem One is in jeopardy following its sale by Arkema SA to industrial investor Klesch Group, which has sought compensation for the transaction because of alleged inaccuracies in the financial information provided.

Kem One is in receivership and negotiating with three potential suitors -- an investment fund, a buyout firm, and a union -- it said in a statement yesterday. A private individual has also expressed interest in the industrial side of the business, Kem One said.

Advent International Corp. has been locked into its purchase of PVC maker Vinnolit since 2000.

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

To contact the editor responsible for this story: Simon Thiel at sthiel1@bloomberg.net

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