Bloomberg News

Georgia Gulf Bid Approved by Royal Group Shareholders

August 04, 2006

Georgia Gulf Corp. (GGC:US), the second- biggest producer of vinyl compounds in North America, won the support of Royal Group Technologies Ltd. shareholders for its C$1.2 billion ($1.06 billion) takeover offer.

More than two-thirds of voting shareholders supported the bid of C$13 a share, Woodbridge, Ontario-based Royal Group said at a meeting in Toronto broadcast on the Internet. The offer is 44 percent higher than Royal Group's closing stock price the day prior to the June 9 bid announcement. Royal Group put itself up for sale in May 2005 after dismissing two top executives.

Georgia Gulf, the second-biggest North American producer of vinyl resins, makes the raw materials that Royal Group molds into window frames, plastic pipe and fences. The acquisition will boost Georgia Gulf's quarterly profit by $30 million a quarter, adding 35 cents a share to $4 in anticipated 2007 per- share earnings, UBS Securities analyst Jeffrey Cianci said.

``We continue to see the Royal Group Technologies acquisition as being a positive, accretive move for Georgia Gulf,'' Cianci said in a July 31 note to clients.

The acquisition should be concluded by September, Cianci said. Georgia Gulf spokeswoman Angie Tickle and Royal Group spokesman Mark Badger didn't return calls for comment.

Shares of Georgia Gulf fell 37 cents, or 1.4 percent, to $26.24 at 4:01 p.m. in New York Stock Exchange composite trading. Royal Group rose 10 cents to $C12.60 a share. Georgia Gulf has dropped 14 percent since June 8, the day prior to the bid, and Royal Group has gained 39 percent.

Workforce Increase

Georgia Gulf's workforce would soar almost eightfold with the addition of 7,800 employees to the company's 1,123 full-time workers.

Royal Group, which posted losses in five of the past six quarters, allowed more than 30 potential bidders to review its internal finances, the company said.

Royal Group had earnings before interest, taxes, depreciation and amortization of $160 million last year, excluding lawyers' fees, consultants and other costs, Georgia Gulf has said. Reduced costs for raw materials, molding and shipping, as well as plant consolidation, will boost profit on that basis to $224 million, the company said.

Georgia Gulf had 2005 sales of $2.27 billion and Royal Group had C$1.7 billion.

Georgia Gulf plans to pay for the acquisition with new debt. Moody's Investors Service said June 9 that it might downgrade ratings on Georgia Gulf's $225 million in debt from Ba2, two levels below investment grade.

Executives Dismissed

Royal Group Chief Executive Officer Lawrence Blanford sold real estate and businesses to cut costs and make the company attractive to buyers. Blanford took over in May 2005 after the company dismissed its former chief executive Doug Dunsmuir and founder and Chairman Vic De Zen in 2004 for failure to disclose their interest in a parcel of land that was sold to the company.

Royal Canadian Mounted Police and Ontario regulators have been investigating transactions between the company and a Caribbean resort controlled by De Zen. No charges have been laid in connection with the investigations.

In May, Royal Group said its first-quarter net loss widened to C$19.6 million from C$11.4 million on costs to sell units and respond to investigations.

PolyOne Corp., based in Avon Lake, Ohio, is the biggest producer of vinyl compounds in North America.

To contact the reporters on this story: Jack Kaskey in New York at jkaskey@bloomberg.net.

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net


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