Mexico Orbia considers divestment of vinyls buisness

Abstract

HOUSTON (ICIS)--Orbia is considering a divestment of its Vinyl business in addition to forming an alliance or pursuing some other strategic alternatives for the group, the Mexican polyvinyl chloride (PVC) producer said in a regulatory filing.

HOUSTON (ICIS)--Orbia is considering a                    divestment of its Vinyl business in addition to                    forming an alliance or pursuing some other                    strategic alternatives for the group, the                    Mexican polyvinyl chloride (PVC) producer said                    in a regulatory filing.

Orbia made the filing with the Mexican Stock                    Exchange (BMV) in response to an article fromBloomberg.

Possible buyers include Apollo Management,                    INEOS and Westlake Chemical, according to                    analysts, who quoted the Bloombergarticle.

The deal is worth up to $4bn, according to                    Grupo Financiero Monex, a Mexican financial                    firm.

Westlake declined to comment.

INEOS did not immediately respond to a request                    for comment made to its office in the UK.                    Apollo did not immediately respond to a request                    for comment.

Orbia did not immediately respond to a request                    for additional comment.

Were Westlake to successfully submit a bid, it                    would add 2.5m tonnes/year of vinyl capacity to                    the company, according to Alembic Global                    Advisors, a US-based analyst firm.

Alembic estimated that the reported bid price                    from Bloomberg stands at a multiple of                    7.3x in regards to Vestolit's third-quarter                    earnings before interest, tax, depreciation and                    amortisation (EBITDA). If that's the case, then                    it could boost Westlake's earnings/share from                    the first year.

It would bring the company's net debt/EBITDA                    ratio to 3.4x, Alembic said.

The Vinyl business represents 32.6% of the                    sales and 30.0% of the EBITDA of Orbia during                    the past 12 months, Monex said in a research                    note.

The Vinyl business includes Vestolit and                    AlphaGary

In addition to the company's Vinyl business,                    Orbia also owns the Fluent business group,                    which makes pipe. Fluent includes Wavin,                    Amanco, Dura-Line and Netafim.

Orbia's Fluor business mines fluorite and                    produces fluorochemicals.

The following table shows 2018 sales of the                    three businesses. Figures are in millions of                    dollars.

Vinyl
2,460
Fluent
4,077
Fluor
837
Total
7,374

Prior to the report of the possible sale,                    Orbia's stock was trading at peso (Ps) 40.60.                    It has since risen to Ps48.23.

Orbia was previously known as Mexichem. It owns                    emulsion and suspension PVC plants in Mexico,                    Colombia and the US.

PVC PRICING TRENDS
In an                    unexpected move, Orbia rolled over January                    prices from December for its domestic and                    export sales in order to undercut US imports in                    Mexico and increase exports to South America,                    thus securing inventory reduction.

The initiative made Mexico’s PVC competitive,                    as US January offers of pipe-grade resin in                    Mexico are showing a $35/tonne increase, while                    US offers in South America show a $30/tonne                    increase.

Export prices for Mexican pipe grade PVC have                    been flat since November at $740/tonne FOB                    (free on board) Altamira, rendering values of                    about $810-830/tonne CFR (cost and freight)                    main port South America.

Mexico’s inventories levels have since fallen,                    and February price discussions are now being                    held at an increase for domestic and export                    markets.

Additional reporting by Luly Stephens  

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