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Braskem acquires Solvay Indupa for $290 million
2:02 PM MST | December 20, 2013 | Clay Boswell
Solvay (Brussels) has announced an agreement to sell its 70.59% stake in Solvay Indupa (Buenos Aires) to Braskem for $290 million. The deal, subject to antitrust approval, will give Braskem a commanding position in South America’s polyvinyl chloride (PVC) market.Braskem (São Paulo) is already South America’s largest PVC producer, with 1.25 million m.t./year of PVC production capacity. Solvay Indupa, the region’s second-largest producer, has 540,000 m.t./year of PVC capacity divided between two facilities in Brazil and Argentina. After the acquisition, Braskem will have a total of 1.79 million m.t./year of PVC capacity.
IHS Chemical puts South America’s total PVC capacity at 1.89 million m.t./year in 2013, and estimates regional PVC demand at 2.1 million m.t./year. Growing at an average annual rate of 5%, regional demand will total 2.67 million m.t. in 2018, says IHS.
"Vinyls is a strategic market for our company," says Carlos Fadigas, CEO of Braskem. “Braskem recently invested around 1 billion reais in a PVC plant in the state of Alagoas, which was inaugurated in 2012, in order to meet the strong growth in demand for this resin associated with the growth in Brazil's infrastructure sector.”
Once the deal is closed, Braskem will launch a public tender offer for the purchase of the remaining shares in Solvay Indupa on the Buenos Aires Stock Exchange.
The value of the deal includes Solvay Indupa’s net financial debt of €178 million. Solvay says that cash proceeds for its stake will total about $25 million (€18 million), and that the divestment will result in a reported non-cash net loss of about €120 million. "This divestment is part of Solvay's strategic portfolio management," says Jacques Van Rijckevorsel, member of Solvay's executive committee. “It will reduce the group's exposure to the economic cycle and to energy-intensive businesses, allowing Solvay to achieve higher growth, higher returns and lower capital intensity.”