Hidden Billionaires Unmasked as Westlake Chemical Soars
Soaring demand for food packaging, dry-cleaning wrappers and imitation leather created three new U.S. billionaires this year.
The children of Ting Tsung “T.T.” Chao -- James Chao, 65, Albert Chao, 63, and Dorothy Chao Jenkins, 67 -- own a combined 70 percent of Houston-based Westlake Chemical Corp. (WLK), North America’s largest producer of low density polyethylene. The chemicalmaker’s shares have risen almost 90 percent this year. Each has a net worth of at least $1.4 billion, according to the Bloomberg Billionaires Index.
“This is an industry that requires very long-term thinking to be successful,” said Jason Miner, a Princeton, New Jersey- based chemicals analyst at Bloomberg Industries. “The Chaos have distinguished themselves in their ability to see through the mania of the moment.”
None of the Chaos has appeared on an international wealth ranking. James Chao is Westlake’s chairman; Albert is president and chief executive officer. Their sister, Dorothy, sits on the company’s board. David Hansen, a company spokesman, said the family declined to comment on their net worth.
“We pursue profitable growth, we don’t look for top-line growth,” Albert Chao said at the Bank of America Merrill Lynch Global Industrials and Materials Conference in Boston on Sept. 6. “More importantly, we act in a financially disciplined and optimistic manner.”
Westlake shares have increased more than sevenfold since March 2009, making it the third-best performing stock by return in the chemicals industry, according to data compiled by Bloomberg. The surge has been fueled by low natural gas prices and increased demand for plastics in developing countries. The company generated $259 million in net income on sales of $3.6 billion in 2011. Profit was up 17 percent from the year before.
The company manufactures chlorine, caustic soda and low density polyethylene -- a polymer used to make plastics -- at 13 North American plants. Last year, Westlake produced 1.7 billion pounds of polyvinyl chloride, or PVC. It is the second- largest producer of PVC pipe in the U.S. The material is also used in windowframes, blister-pack packaging and the imitation leather found in Mercedes C-class cars.
Westlake also owns a 59 percent interest in Suzhou Huasu Plastics Co., a China vinyl products manufacturer it founded with Norsk Hydro in 1992.
The Chaos have expanded Westlake through acquisitions, having purchased 21 plants since 1986. In May, Westlake withdrew its unsolicited $1.2 billion bid to buy Atlanta-based Georgia Gulf Corp. (GGC), North America’s largest maker of vinyl construction products, after its offer was rejected as too low. The combined companies would have created North America’s largest maker of vinyl chloride monomer, a chemical compound used to make PVC and vinyl siding.
The Chao family fortune was started by T.T. Chao, who was born in 1921 in Suzhou, China, a city 20 miles west of Shanghai. Chao’s father was an American Tobacco Co. worker, and sent his son to Shanghai University to study railway management, according to T.T’s 2008 obituary in the Houston Chronicle.
With Mao closing in on victory in China’s civil war in 1946, the Chaos moved to Taiwan. Speaking Japanese and English helped T.T. create partnerships with Japanese industrial conglomerate Sumitomo Corp. (8053) and Gulf Oil Corp., then a U.S. oil producer. The family moved in the mid-1980s to the U.S., where his children became naturalized American citizens. T.T., along with sons Albert and James, founded Westlake after acquiring a Lake Charles, Louisiana, polyethylene plant from Occidental Petroleum (OXY) in 1986.
With T.T. serving as chairman, James became the company’s first president. He has championed management theories such as Lean Six Sigma and TRIZ, a Russian theory of creative problem solving.
Albert worked as Westlake’s first executive vice president before becoming CEO in 2004. He earned his bachelor’s degree from Brandeis University in Boston, and an MBA from Columbia University. He sits on the board of trustees of Rice University.
“Albert’s character is very even-keeled and his style in investor meetings and on calls is low-key and straight to the point,” Miner said. “That stable, long-term perspective has driven the company to success.”
Dorothy Chao Jenkins sits on the board of directors and serves on the nominating and governance, compensation and corporate risk committees. She is also on the board of trustees of Wellesley College in Massachusetts, where she earned her bachelor’s degree in mathematics, as well as the boards of the Polk Museum of Art and the John and Mable Ringling Museum of Art Foundation in Florida. She is married to Publix Super Markets Inc. (PUSH) Chairman Charles H. Jenkins, Jr. and lives in Lakeland, Florida.
According to filings with the U.S. Securities and Exchange Commission, each Chao sibling owns a third of the 46 million shares controlled by the family’s TTWF LP holding company, whose name is derived from the initials of their parents.
Westlake sold shares in an initial public offering on the New York Stock Exchange in 2004. TTWF has collected more than $70 million in dividends and $170 million from share sales. The family will split $35 million in income annually following a 154 percent increase in the company’s quarterly dividend announced Aug. 20, to 18.75 cents per share.
In 2007 and 2009, the family collected about $30 million in dividends from Titan Chemicals, a plastics manufacturer they founded in 1986 with the Malaysian government. In 2010, Korea’s Honam Petrochemical bought Titan for $1.2 billion. The siblings split more than $425 million from the sale. Malaysia doesn’t have capital gains tax, and doesn't count capital gains as taxable personal income.
“They drive a fair bargain,” said Miner. “They wait for a good deal.”
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