Market Overview

UPDATE: Axiall Reports Rejection of Revised Bid from Westlake

Share:

On March 31, 2016, Axiall sent a letter to Westlake noting that Westlake had submitted a revised indication of value prior to any meaningful discussion of the very substantial synergies between the two companies, estimated by Axiall to be as high as $270 million annually, $210 million more than the $60 million in synergies underlying Westlake's proposal. The letter also noted that despite its request, Axiall was not provided the opportunity to conduct due diligence with respect to Westlake's business, which it would need given the substantial stock component to Westlake's proposal.

The March 31st letter to Westlake follows:

March 31, 2016

Westlake Chemical Corporation

Westlake Center

2801 Post Oak Blvd.

Suite 600

Houston, Texas 77056

Attention:
Albert Chao, President and Chief Executive Officer

James Chao, Chairman of the Board

Gentlemen,

Axiall Corporation's board of directors, with the assistance of independent financial and legal advisors, reviewed your March 29th proposal to acquire Axiall for $14.00 cash and 0.1967 Westlake shares per Axiall share, or approximately $23.12 per share, and determined that it is inadequate.

The Axiall board also believes that Westlake's revised proposal is inconsistent with our understanding when we met in Houston on March 8th. Our Chairman, another independent director and I traveled to Houston specifically to establish a process for engagement with Westlake and to demonstrate our Board's willingness to have constructive discussions regarding your initial proposal despite its deficiencies. As we told you in that meeting, we were willing to share comprehensive business, financial and other non-public information, including estimated synergies associated with a possible transaction, in order to demonstrate that a substantial increase in your initial price of $11.00 in cash and 0.1967 Westlake shares was warranted.

Following our March 8th meeting, we had numerous in-person meetings, telephone calls and expert sessions and provided you substantial non-public information, including through a virtual data room. In addition, at your advisors' request, we delayed setting a record date for our upcoming shareholder meeting to provide you ample opportunity to digest the information we furnished. Given this, we were surprised and disappointed by your decision to submit a revised indication of value before the completion of these 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. 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.

We have also provided you with substantial information regarding our building products business. We are encouraged by the strong interest we are receiving in the building products business. In accordance with your request, we will send you a process letter and we would encourage you to submit a proposal as soon as possible if you would like to remain active in the building products divestiture process.

To reiterate what we have already told you, we are not opposed to a strategic transaction provided that it delivers full and fair value to Axiall shareholders. We remain willing to share information and have further discussions, but the value you currently propose simply ignores the high quality of our assets, the significant growth potential of our business and the powerful synergies available in a combination. If you are not willing to substantially increase your proposed value and engage in further discussions, we are prepared to explain to Axiall's shareholders why your proposal does not fairly reflect Axiall's intrinsic value and does not adequately compensate Axiall's shareholders for the growth in shareholder value that we are confident we are poised to deliver.

Sincerely,

/s/ Timothy Mann, Jr.
President and Chief Executive Officer

On April 3, 2016, Westlake notified Axiall that it intended to disclose its revised proposal publicly and stated that it believed that the Company's March 31st letter inaccurately portrayed certain aspects of the parties' discussions, particularly (1) whether Westlake had been informed that Axiall had delayed setting a record date, (2) whether Westlake engaged in meaningful discussions of potential synergies and was willing to provide due diligence on Westlake, and (3) whether numerous in-person meetings had occurred. Axiall believes that its March 31st letter is accurate.

The discussions between Axiall and Westlake were conducted pursuant to a confidentiality agreement that includes standstill provisions that permit Westlake to make proposals to acquire Axiall and pursue nominations to Axiall's Board of Directors at its 2016 Annual Meeting of Stockholders, but prohibit Westlake from making a tender or exchange offer to Axiall shareholders or buying additional Axiall stock before September 15, 2016. Axiall has not yet scheduled the date of its 2016 Annual Meeting of Stockholders or set the record date for stockholders entitled to vote at the 2016 Annual Meeting.

Morgan Stanley & Co. LLC and Barclays are acting as financial advisors to Axiall and Jones Day and Weil, Gotshal & Manges LLP are acting as legal counsel.

Posted-In: News M&A Press Releases

 

Related Articles (WLK + AXLL)

View Comments and Join the Discussion!

Facebook Is More Than Just A Social Network; Axiom Says Shares Are Worth $150

Ruckus Investors Win Big; Brocade Purchasing Co. For $14.43/Share In Total Value