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Saudi Arabia : Sabic to Buy GE Plastics for $11 Billion

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  • Saudi Arabia : Sabic to Buy GE Plastics for $11 Billion

    Et pourtant, cette societé a été créer en 1976. En faisant l'acquisition de la division plastique de GE, Sabic constituerait un géant mondial, présent dans la fabrication de centaines d'articles de la vie quotidienne, allant des bouteilles à l'emballage alimentaire et des sacs d'épicerie aux jouets et aux pièces automobiles

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    May 18 (Bloomberg) -- Saudi Basic Industries Corp., the world's biggest chemical company by market value, will buy General Electric Co.'s plastics unit for about $11 billion, two people familiar with the negotiations said.

    The acquisition is the largest ever for the Persian Gulf and the price is above the $8 billion to $10 billion estimated by some investors. Both people requested anonymity because a decision hasn't been made public.

    Saudi Basic, known as Sabic, has doubled sales since 2002 because of the Riyadh, Saudi Arabia-based company's access to the world's biggest reserves of oil, used as a raw material for plastics and petrochemicals. GE, by contrast, put its plastics unit up for sale in January after the soaring cost of crude cut into earnings. The Fairfield, Connecticut-based company may plow proceeds into less volatile areas such as health care.

    ``This is a good move for Sabic,'' said Tony Potter, Director of Olefins at Houston-based Chemical Market Associates Inc. ``It gets them marketing expertise, technology and access to markets. Without GE, Sabic was perhaps faced with penetrating quite a sophisticated market from scratch, where you don't just compete on the price of your feedstock.''

    Shares of GE, the world's second-largest company by market value behind Exxon Mobil Corp., rose 62 cents, or 1.7 percent, to $37.15 at 11:15 a.m. in New York Stock Exchange composite trading. The shares are virtually unchanged this year.

    Other Bidders

    Sabic stock has gained 19 percent this year, giving the company a market value of 313.8 billion riyals ($84 billion). BASF AG, the biggest chemical company by sales, is valued at 44.2 billion euros ($60 billion).

    Sabic shares didn't trade today, which is part of the Saudi weekend. The government owns about 70 percent of the stock, with the rest restricted to investors in Saudi Arabia and the five other states of the Gulf Cooperation Council.

    The purchase may be announced as soon as today, said one of the people. Sabic, U.S. buyout firm Apollo Management LP and Dutch plastics company Basell NV, a unit of New York's Access Industries Inc., had been leading the bidding for GE Plastics with offers of more than $10 billion, people familiar with the auction process said earlier this month. The decision to sell to Sabic was made by GE's board yesterday, two of the people said.

    Data compiled by Bloomberg shows that the deal is the largest in the Gulf and second-biggest in the Middle East, behind Egyptian billionaire Naguib Sawiris's 12.2 billion-euro ($16.5 billion) purchase of Wind SpA through his Weather Investments Srl holding company in 2005.

    Compact Discs, Helmets

    Sabic Chief Financial Officer Mutlaq Al-Morished declined to comment when contacted by mobile phone today. GE spokesman Gary Sheffer also declined to comment, as did Basell spokesman Mark Mendelson and Steve Anreder for Apollo.

    GE Plastics, based in Pittsfield, Massachusetts, last year posted a profit of $674 million on sales of $6.65 billion.

    Buying the division will give Sabic a foothold in polycarbonates, easily worked plastics used in applications ranging from riot shields to compact discs. GE's proprietary Lexan plastic is used in roofs, lighting, walkways, windows and domes.

    Sabic, which opened its first manufacturing sites outside the Middle East in Germany and the Netherlands in 2002, would also get plants and technology centers in 21 countries including China, India, Japan, Brazil and Thailand, according to the GE Plastics Web site.

    `Favorable Market'

    ``GE is using a very favorable market to sell the asset,'' said Mark Demos, an analyst at Fifth Third Asset Management in Minneapolis, which owns more than 11.4 million GE shares. ``They're ridding themselves of a cyclical business, and cyclical businesses don't have a big place in this company's future.''

    Sabic's advantage, should it complete the purchase, will stem from its access to abundant sources of feedstock from state-owned Saudi Aramco, the world's biggest oil company. The chemical maker exploits the natural gas released during oil extraction and once burned at the wellhead to achieve costs lower than at U.S. and European competitors.

    Sabic's investments in capacity expansion are expected to reach $20 billion by 2009 as it seeks to move beyond its Saudi Arabian base and establish manufacturing facilities closer to its customers. The company posted a record quarterly profit in the three months through March as demand for plastics, solvents and polymers boosted prices and volumes. Net income jumped 50 percent to 6.3 billion riyals.

    Increased Capacity

    The late King Khalid bin Abdulaziz established Sabic in 1976 with the aim making Saudi Arabia less dependent on oil. Once run from a small office with a handful of employees, it has grown to become the largest public company in the Middle East, employing 17,000 people. Production capacity totals about 42 million metric tons, almost 20 percent more than in 2001.

    The online edition of the Wall Street Journal said yesterday that Sabic had agreed to buy the plastics division, which still makes products developed from founder Thomas Edison's experiments. GE Chief Executive Officer Jeffrey Immelt and predecessor Jack Welch held management jobs at the unit early in their careers.

    Since becoming GE's CEO in 2001, Immelt has agreed to $80 billion in acquisitions to enter faster-growing areas including health care, while divesting $35 billion of assets such as plastics and insurance that are in volatile markets or are capital intensive.

    So far this year, Immelt has agreed to more than $15 billion in purchases, including some diagnostic units of Abbott Laboratories for $8.13 billion, Smiths Group Plc's aerospace unit for $4.8 billion, and oil and gas drilling-equipment maker Vetco Gray Inc. for $1.9 billion.

    Immelt's Premiums

    Immelt is trying to keep profit rising at least 10 percent a year and sales growth at two to three times global domestic product. He's locking in more predictable, years-long service contracts by using GE equipment to help build airports, hospitals, transportation and power plants. Immelt also is getting more revenue from faster-growing economies such as China, India, the Middle East and Eastern Europe.

    A sale of plastics for a price higher than originally anticipated may make investors more comfortable with some of the premiums Immelt has paid for GE's purchases, Demos said.

    Last month, Immelt told investors he wanted to announce a buyer for plastics in the second quarter and complete the divestiture in the third. GE, also the world's biggest maker of power generation equipment and services, signed more than $2 billion in contracts in the past six months for turbines and desalination systems for Saudi Arabia.

    Thomas Edison

    GE probably will invest returns from the sale in areas that are growing faster, such as oil and gas exploration and health care, analysts including Citigroup Inc.'s Jeffrey Sprague said in notes to clients this year. New York-based Sprague, the top- rated analyst in an Institutional Investor magazine survey, rates GE a ``buy.''

    A sale may slice 3 cents to 4 cents a share off profit in 2007, Sprague said. He estimates full-year earnings of $2.22.

    GE Plastics was created in 1930 out of experiments with plastic filaments for light bulbs conducted by Edison in 1893, according to GE's Web site. It's currently run by Charlene Begley, 40, one of the highest-ranking women at the company.

    General Electric has pushed executives through the division in order to test their managerial mettle. In his memoir, ``Straight from the Gut,'' Welch recounted one of his earliest management experiences: An explosion in a factory he was responsible for and how his immediate boss encouraged him to solve the problems that led to the blast rather than punish him for it.

    http://www.bloomberg.com/apps/news?p...6Bk&refer=home
    Si vous ne trouvez pas une prière qui vous convienne, inventez-la.” Saint Augustin
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