OpenGate Capital, which earlier this month agreed to buy a PVC compounder business from Solvay SA (SOLB), agreed to buy an insolvent producer of the plastic after joining forces with its rival bidder.
After initially submitting separate bids for KemOne, OpenGate joined with private investor Alain de Krassny to win the support for the merged proposal from administrators running the sale process, the companies said in a joint statement today. The decision follows a final hearing at the Commercial Court of Lyon today. Financial terms weren’t disclosed.
The two competitors-turned-partners are betting that the PVC market is poised to turn a corner and recover from subdued demand coupled with high energy prices and competition from low-cost producers in the U.S. and Asia.
“Through this alliance we can capitalize on our respective strengths to optimize both the strategic and industrial view of this vinyl activity” said Julien Lagrèze, European head for OpenGate.
The agreement ends a prolonged and bitter separation ofthe business from original owner Arkema SA (AKE), who initially sold it to private equity firm Klesch Group. That transaction, announced in 2011, was seen as a landmark one for Europe’s struggling PVC industry after failed attempts to consolidate to lower costs. Klesch claimed to have lost 100 million euros in the first six months of ownership and the buyout firm went on to claim damages from Arkema for failing to provide accurate information about the business.
For Los Angeles-based OpenGate, acquiring KemOne is an opportunity to acquire an integrated business manufacturing the materials that would complement its Profialis PVC window and door-making business, purchased from Tessenderlo Chemie NV. (TESB) The buyout firm said at the time that Profialis would provide a platform to expand deeper into PVC and the chemicals industry. Earlier this year, it acquired Constellium Extrusions, a French maker of aluminum profiles.
The two partners face the challenge of fixing the upstream materials side of the business. Mexichem SAB de CV and Oyak Group have expanded in the European PVC materials and products market. Ineos Group and Solvay opted to combine their operations and are seeking antitrust approval for the move.
Manufacturers face the residing challenge of overcapacity in the European market. As many customers are small in size with limited budgets to buy in materials in advance, some PVC suppliers struggle to get the longer-term contracts needed to provide stability to their own finances.
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