GE discards plastics division
GE has been selling off its industrial materials divisions one by one over the last few years. Now it has announced it will sell its plastics operations. The buyer is Saudi Basic Industries Corporations (SABIC).The deal is for $11.5 billion.
Sabic is the largest publicly held company in the Middle East and is the largest chemicals company in the world by market value. (Germany's BASF is the largest by sales.) The deal will be the largest ever by a Persian Gulf company and the largest ever of an US-based company from the Middle East
GE Plastics a major company with plants in 20 countries and sales well over $6 billion a year. It sells plastics used in plastics in automobiles, computers, telephones, packaging, and construction, among other areas. Sabic gets a worldwide sales force, technical know-how, and a number of patents, including one for widely-used Lexan, a construction-use plastic...
Sabic apparent6ly won an auction versus strategic buyers Dutch-based Basell Industries (a part of the US-based Access Industries) and US manufacturing conglomerate Koch Industries. It also beat out equity buyers Apollo and Bain Capital. Sabic is a major petrochemical company, and the idea seems to be a vertical integration of oil refining and petrochemical products manufacture.
As pointed out in a Financial Times article ("Sabic set to acquire GE plastic unit for $11.5bn", 5/20/2007)
The sale of the plastics division is part of GE's strategy to move towards higher-margin sectors such as infrastructure and industrial components. Jeffrey Immelt, chairman and chief executive, has reiterated that the company did not want to invest any more in a business.
GE has expanded its presence in faster-growth industries like medical equipment, aerospace, and finance. The infusion of capital may give GE more cash to pour into those areas.
Meanwhile, the shares of Dow Chemical, the US's' #1 chemical company, surged on expectations that it might be the next buyout candidate. As we've written before, everything seems to be in play now, and there's someone able and willing to spend almost any sum for any business, and each added buyout leads to the next one.
