Westlake to Wage Axiall Proxy Fight After New Bid Spurned

  • Proposal is increased 17% to $1.6 billion in cash and stock
  • Suitor seeks 10 board seats at vinyl building-products maker

Westlake Chemical Corp. will wage a proxy battle for control of Axiall Corp., North America’s largest producer of vinyl building products, after a sweetened $1.6 billion takeover bid was rejected.

Axiall turned down the unsolicited cash-and-stock offer of $23.35 a share, raised 17 percent from a January proposal, Houston-based Westlake said in a statement Monday. A previously announced slate of 10 nominees to the Axiall board will be submitted to the Securities and Exchange Commission, Westlake said.

“Given the Axiall Board’s unrealistic expectations and entrenched position, we feel we have no choice but to proceed today with a proxy contest to replace Axiall’s directors,” Westlake Chief Executive Officer Albert Chao said in a letter to Axiall’s board.

Axiall’s board unanimously rejected the revised offer and said Westlake was underestimating the cost savings from a combination. The board estimates that the savings could reach $270 million a year, compared with the $60 million underlying Westlake’s proposal, Atlanta-based Axiall said in a statement Monday.

"We struggle to understand why you would not engage in any meaningful discussion of the very substantial synergies between the two companies prior to your revised proposal," Axiall CEO Timothy Mann Jr. said in a letter to Westlake’s board.

No Opportunity

In addition, Axiall hasn’t been given an opportunity to conduct due diligence on Westlake’s business, and that’s needed because of the stock component of the offer, Mann said. Westlake said it raised its bid on March 29 following due diligence of Axiall’s business. Axiall makes chlorine and PVC pipe as well as vinyl siding, window frames and decking.

Axiall climbed 3.6 percent to $22.92 at 10:17 a.m. in New York. Westlake fell 1.6 percent to $46.79.

Investor Pressure

Axiall, formerly known as Georgia Gulf, has come under pressure in recent weeks from Shapiro Capital Management, its biggest investor, to negotiate with Westlake. The latest offer represents a 143 percent premium to Axiall’s closing price on Jan. 22, the day before the initial proposal.

Chao in his letter said he is “very concerned” Axiall’s planned sale of its building products business would hurt the value of the overall company.

The latest offer includes $14 in cash and 0.1967 Westlake share. The deal is valued at $3.1 billion including the assumption of $1.5 billion of debt, Westlake said.

Westlake is prohibited from buying additional Axiall stock before Sept. 15 under a standstill agreement, Axiall said. The company hasn’t scheduled a date for its annual meeting of stockholders.

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. Axiall’s financial advisers are Morgan Stanley and Barclays Plc, and its legal counsel is Jones Day and Weil, Gotshal & Manges.

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