Plastics Maker Axiall Rejects $1.41 Billion Westlake Offer

  • Axiall says proposal undervalues its assets and prospects
  • Cash-and-stock offer values plastics maker at $20 per share

Axiall Corp., North America’s largest producer of vinyl building products, rejected a revived takeover bid from Westlake Chemical Corp. that values the U.S. company at about $1.41 billion. The stock climbed the most in more than six years.

Houston-based Westlake, which also produces vinyl products, and is controlled by the billionaire Chao family, disclosed the unsolicited, $20-a-share cash-and-stock offer in a statement Friday after Axiall refused to negotiate. The bid is more than double Axiall’s closing share price on Thursday.

Axiall received the proposal on Jan. 25, and the board unanimously rejected it, the Atlanta-based company said in a separate statement. Axiall, which is investing in a new ethylene plant as it considers selling its building products business, was trading for more than $20 a share as recently as Dec. 1, said Chief Executive Officer Timothy Mann.

"Westlake’s proposal is an opportunistic attempt to take advantage of challenging public equity market conditions and significantly undervalues Axiall’s assets and its long-term prospects,” Mann said in the statement.

Axiall has come under pressure in the past year to do a deal. Shapiro Capital Management, its biggest investor, sent the Atlanta-based company’s management a letter in June asking them to consider strategic options including a sale. Shareholder Franklin Resources Inc. said in May that Axiall should explore selling parts or all of its business.

Westlake Shares

Axiall’s management should negotiate with Westlake, Sam Shapiro, chairman of Shapiro Capital, which holds an 8.6 percent stake, said by phone. Shapiro said he likes that Axiall investors would get Westlake shares under the proposal.

Axiall surged 83 percent to $17.93 at the close in New York, the biggest gain since July 2009. Westlake fell 2.3 percent to $45.48.

In 2012, Westlake made an unsolicited $1.2 billion bid for Axiall, then known as Georgia Gulf Corp., a proposal rejected as too low. The company was renamed in 2013 after acquiring chlorine assets from PPG Industries Inc.

Axiall is worth $33 a share, based on Westlake’s 2012 bid plus the purchased chlorine assets, Hassan Ahmed, an analyst at Alembic Global Advisors said in a note. Axiall may sell for $25 a share if others join the bidding, said James Sheehan, an analyst at Suntrust Robinson Humphrey Inc. Westlake is known for buying distressed assets, he said in a note.

‘Surprised’ Rejection

The latest bid, comprised of $11 in cash and the rest in Westlake shares, is valued at $2.9 billion when it includes Axiall’s $1.5 billion debt.

Westlake CEO Albert Chao was "surprised and disappointed" by Axiall’s rejection, he said in his company’s statement.

The Chao family owns 70 percent of Westlake, according to data compiled by Bloomberg. The Chao family fortune was started by T.T. Chao,who with his sons Albert and James founded Westlake in 1986 with a polyethylene plant acquired from Occidental Petroleum Corp.

An acquisition of Axiall would be Westlake’s biggest transaction, surpassing its 490 million-euro ($666 million) purchase of a German maker of polyvinyl chloride from Advent International Corp. in 2014. Axiall would provide Westlake with additional ethylene and chlorine assets for its vinyls business, according to Alembic’s Ahmed.

Westlake’s financial advisers for the bid are Deutsche Bank AG and Goldman Sachs Group Inc., and its legal counsel is Cleary Gottlieb Steen & Hamilton LLP. Axiall’s financial adviser is Morgan Stanley and Jones Day is legal counsel.

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