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Westlake goes hostile after Axiall rejects second, $3.1-billion bid

April 5, 2016
Chemical Value Chain

Axiall’s board of directors has turned down a second, $3.1-billion acquisition bid from Westlake Chemical. Westlake has responded by formally ending negotiations and asking Axiall shareholders to elect a new board selected by Westlake.

The new bid, submitted on 29 March, offered $23.35 ($14.00 in cash and 0.1967 of a Westlake share) for each share of Axiall, 17% above the $2.9-billion bid submitted 29 January.

“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 with new, independent, and highly qualified directors who are willing to evaluate all options in accordance with their fiduciary duties,” says Westlake president and CEO Albert Chao in a letter sent to Axiall shareholders on 4 April. Westlake named its slate 16 February.

In his letter, Chao notes that Axiall shares were trading at $9.60 the day before Westlake’s initial offer. “[S]ince then, nothing has changed in Axiall’s outlook that would lead to a standalone valuation anywhere near the value of our proposal,” he says. “In addition, Axiall has consistently overestimated the earnings power of its business and has a track record of failing to deliver on its operational and strategic objectives.”

Axiall shares opened at $22.68 on 4 April, quickly rose to $23.14, and fell back to $22.66 by late morning.

Axiall says it had been “actively engaged in discussions with Westlake” since 8 March to see if the company “was willing to make a revised proposal that appropriately reflects the high quality of Axiall’s assets, the significant growth potential of its business, and the powerful synergies available in a combination.” In a letter rejecting Westlake’s second bid, Axiall CEO Timothy Mann says the board was “surprised and disappointed” that Westlake had revised its bid before “the completion” of the discussions.

“In particular, 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 especially since we have told you we believe the synergies could be as high as $270 million annually,” the letter says. “This is $210 million more than the $60 million in synergies underlying your proposal. In addition, as there is a substantial stock component to your proposal, we would need the opportunity to conduct due diligence with respect to Westlake’s business if we were to move forward,” Mann says.

By Clay Boswell

Source: Chemical Week

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