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Ineos talks Solvay PVC joint venture

May 13/2013

MOSCOW (MRC) -- Two of Europes biggest chemical companies have agreed a joint venture that will create one of the worlds largest producers of PVC plastics by revenues, said Financial Times.

Solvay, the Franco-Belgian chemicals company, will pool its European business that creates chlorvinyls the base materials for PVC plastics with that of privately owned rival Ineos Group , in a move that will eventually result in the Anglo-Swiss company taking full control of the joint venture.

Ineos operates chemicals facilities across the UK and is the countrys second largest private company measured by sales behind Alliance Boots, according to data from BDO, the professional services group.

Should the deal gain regulatory approval from the European Commission, the joint venture is expected to report annual recurring earnings before interest, tax amortisation and depreciation of about EUR260m from revenues of EUR4.3bn.

The 50-50 joint venture will allow Solvay to exit the market for PVC plastics used in the manufacture of construction products such as pipes and window frames which has suffered during the downturn on the back of waning demand from the building industry.

Within four to six years, Ineos will buy out Solvays half share for 5.5 times the combined groups average annual ebitda equating to a price of more than EUR1bn.

Solvay will contribute its vinyl activities and its Chlor Chemicals business, comprising seven production sites in Europe, while Kerling, an Ineos subsidiary, has offered up its chlorvinyls and related businesses.

The joint venture will employ 5,650 staff across nine European countries, including the UK, Belgium, France and Italy. Should the deal gain regulatory approval, Ineos will pay Solvay EUR250m in cash as a down payment for its 50% stake.

Solvays exit from PVC production will allow the Franco-Belgian company to hone its focus on its more profitable businesses, such as high-tech polymers for the healthcare and oil and gas industries.

The joint venture is expected to benefit from cost savings in the groups head office, marketing, transport and logistics operations. However, both Solvay and Ineos did not define the amount of synergies they expected.

As MRC wrote earlier, Ineos said it has signed an agreement to secure ethane from the US that it will use as a feedstock to operate its steam crackers in Europe. It has agreed a long-term deal with Range Resources Corp. for the lifting of ethane from the Marcus Hook facility, located near Philadelphia, from 2015.
Author:Anna Larionova
Tags:PVC, Ineos Polyolefins, Solvay.
Category:General News
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