Westlake Chemical Scoops up Vinnolit - Analyst Blog


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Specialty chemicals company Westlake Chemical Corp. ( WLK ) has agreed to buy Ismaning, Germany-based Vinnolit Holdings GmbH and its subsidiaries from private equity firm Advent International for €490 million (roughly $667 million).

Vinnolit is a leading producer of specialty polyvinyl chloride (PVC) resins. The company, which generated €917 million (around $1.2 billion) of revenues last year, has six production facilities in Gendorf, Burghausen, Cologne, Knapsack and Schkopau in Germany and Hillhouse in the UK with an aggregate annual capacity of 780,000 metric tons of PVC.

Vinnolit owns a world class R&D facility in Gendorf and applications laboratory in Burghausen. Its products are used across a vast spectrum of industrial and building product applications including automotive sealants, cable sheathing, flooring, medical applications, pipes, rigid film and technical coatings.

Westlake plans to finance the buyout using existing cash and credit facilities. The acquisition, which is subject to regulatory approvals and other closing conditions, is expected to consummate in the third quarter of 2014.

The acquisition is a strategic fit for Westlake and is expected to help it broaden its global chlorvinyl footprint. It will add key specialty PVC products and technology to the company's portfolio.     

Westlake's shares were up 3.4% in the trading session following the announcement. Its shares closed at $79.14 yesterday, gaining 2.9%. The stock is up roughly 30% so far this year.

Westlake's profit surged roughly 28% to $158 million or $1.18 per share in first-quarter 2014, reported on May 5. The improvement came despite unfavorable impacts from higher propane costs, severe winter weather conditions and the planned maintenance turnaround at the company's Calvert City plants in the reported quarter.

Westlake benefited from increased sales volumes for polyethylene and ethylene, higher selling prices for key products and contributions from its specialty PVC pipe business (acquired in May 2013) in the quarter.

Westlake is a Zacks Rank #1 (Strong Buy) stock.

Other companies in the chemicals space with favorable Zacks Rank include A. Schulman, Inc. ( SHLM ), PolyOne Corporation ( POL ) and International Flavors & Fragrances Inc. ( IFF ). While A. Schulman carries a Zacks Rank #1 (Strong Buy), both PolyOne and International Flavors & Fragrances hold a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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