Westlake Chemical Corporation (NYSE: WLK) announced tday that it has submitted a proposal to acquire all of the outstanding shares of Axiall Corporation (NYSE: AXLL) for $20.00 per share (comprised of $11.00 in cash and 0.1967 of a Westlake share, which represented a value of $9.00 based on Westlake's closing price on January 22, 2016, the last trading day before Westlake made its proposal).
The proposal, which has been summarily rejected by the Axiall Board, represented a significant premium of 108% to Axiall's closing price of $9.60 on January 22, 2016. The total value of the proposed transaction is approximately $2.9 billion, including the assumption of certain Axiall liabilities, which include approximately $1.5 billion of debt outstanding as of September 30, 2015.
Albert Chao, Westlake's President and Chief Executive Officer, said, "We are surprised and disappointed by Axiall's summary rejection of our proposal, which provides Axiall shareholders with a significant premium and upside potential via their participation in the increased scale and synergies of the combined company. The combined company would be more diversified and have a stronger financial profile than Axiall, providing it with significant financial and operational flexibility, a greater ability to serve its customers, and improved ability to capitalize on future investment opportunities.
"We are confident that our proposed transaction represents the best way to maximize value for Axiall shareholders, but despite the attractiveness of our proposal, Axiall has rejected the proposal and refused to engage with us to discuss its merits. Instead, Axiall said it prefers to pursue a standalone strategic plan, but the market reaction to this plan does not suggest it will deliver anywhere near the value and upside of our proposal. In this challenging environment, we believe Axiall's unwillingness to even discuss our compelling proposal exposes its shareholders to significant risk and uncertainty. Given this response, we feel we have no choice but to bring this proposal to the attention of Axiall shareholders.
"We urge the Axiall Board to act in the best interests of its shareholders by meeting with us to begin negotiating a transaction without delay," Mr. Chao concluded.
Westlake has retained Deutsche Bank Securities Inc. and Goldman, Sachs & Co. as its financial advisors, Cleary Gottlieb Steen & Hamilton LLP as its legal counsel, MacKenzie Partners, Inc., and other advisors. For additional information about Westlake's proposal, please visitwww.WestlakeAxiall.AcquisitionProposal.com.
Below is the full text of a letter sent from Westlake to Axiall:
January 29, 2016
Board of DirectorsAxiall Corporation1000 Abernathy Road NESuite 1200Atlanta GA, 30328
Attention: Mark L. Noetzel, Chairman of the Board
Dear Members of the Board:
We were surprised and disappointed by your summary rejection of our proposal to acquire Axiall for $20.00 per share (comprised of $11.00 in cash and 0.1967 of a Westlake share, which represented a value of $9.00 based on Westlake's closing price on January 22, 2016, the last trading day before we made our proposal). The proposal represented a significant premium of 108% to Axiall's closing price of $9.60 on January 22, 2016. Importantly, the proposed structure provides your shareholders with an immediate cash premium and the Westlake share component provides upside via participation in the increased scale and synergies of the combined company.
Less than three days after we provided our written proposal, your management informed us that you remain committed to the continued implementation of your current standalone strategic plan. The market reaction to your plan does not suggest investors believe it will deliver anywhere near the value and upside of our proposal. In this challenging environment, we believe your unwillingness to even discuss our compelling proposal exposes your shareholders to significant risk and uncertainty.
The combination of Westlake and Axiall would create a more efficient, diversified and competitive company, far better positioned to succeed and grow in this challenging environment. With Westlake's Olefins business and a combined Westlake/Axiall Vinyls business, there would be an immediate opportunity to backward integrate into the ethylene market. The combined company would also benefit from Westlake's European vinyls business (Vinnolit), which is a global leader in vinyl technology and specialty PVC resins.
The combined company would also have a stronger financial profile than Axiall, providing it with significant financial and operational flexibility, a greater ability to serve its customers, and improved ability to capitalize on future investment opportunities. Based on our proposed consideration mix and strong track record, we believe that the combined company will maintain an investment grade credit rating.
We have already completed extensive analysis and due diligence based on publicly available information. Accordingly, our remaining diligence requirements are limited, confirmatory in nature and capable of being completed on an accelerated timeframe. Our proposal is not subject to a financing contingency and the transaction would be subject only to customary closing conditions, including the receipt of necessary regulatory approvals, which we do not anticipate will present any issues. As an indication of our commitment, we have acquired approximately 4.4% of Axiall's outstanding stock. We have retained Deutsche Bank Securities Inc. and Goldman, Sachs & Co. as our financial advisors and Cleary Gottlieb Steen & Hamilton LLP as our legal counsel. We stand ready to negotiate a definitive merger agreement in parallel with final due diligence.
As we made clear to your management, we would have preferred to engage in a private dialogue regarding our proposal and strongly believe that it is in all parties' best interests to move forward with this transaction promptly. Unfortunately, given your rejection of our offer we feel we have no choice but to bring this proposal to the attention of your shareholders.
The proposed transaction is compelling from a strategic and financial point of view and we are confident that it will benefit each of our companies, our shareholders and our other constituencies. We value Axiall's employees and look forward to working with them in the combined company. We wish to emphasize again that we believe this proposal is clearly superior to your standalone strategy.
We hope that, in the best interests of your shareholders, we can begin negotiating a transaction without delay.
Sincerely yours,
Albert ChaoPresident and Chief Executive Officer
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