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Westlake to Acquire Piping Business

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Specialty chemicals company Westlake Chemical Corporation (WLK - Free Report) entered into a definitive agreement with CertainTeed Corporation to acquire its Pipe and Foundation Group (“PFG”) for about $175 million in cash, including $22 million of working capital with closing adjustments. CertainTeed is a subsidiary of the French public company Compagnie de Saint-Gobain.

PFG primarily produces PVC pipe and fittings for municipal, water well, mining, agriculture and irrigation applications. Westlake expects to complete the take over by the second quarter of 2013, subject to customary regulations.

Pursuant to this buyout, Westlake will possess PFG’s PVC pipe, fittings, profiles and foundations businesses, as well as associated operating facilities in Lodi, Calif and McPherson, Kan, which has a production capacity of roughly 150 million pounds per year.

In addition, Westlake will procure technologies and intellectual properties for the production of a number of specialized products, including Certa-Lok restrained joint pipe and Yelomine branded products for a variety of end-market applications.

The acquisition is a strategic fit for Westlake as it is expected to enhance the company’s North American Pipe and building products portfolio by adding specialty product lines and supporting technology, which they do not possess presently.

Westlake, which is among the prominent chemical-plastics companies along with A. Schulman, Inc. (SHLM - Free Report) , Landec Corp. (LNDC - Free Report) and PolyOne Corporation (POL - Free Report) , reported a mixed fourth-quarter 2012 results last month.

Westlake’s adjusted earnings of $1.42 a share in the quarter compared with 40 cents earned in the year-ago quarter. Earnings surpassed the Zacks Consensus Estimate of $1.25 a share, reflecting a positive surprise of around 14%.

Revenues came in at $801 million in the quarter, down 6.7% from $859 million recorded in the year-ago quarter, missing the Zacks Consensus Estimate of $832 million. The results impacted by lower sales volumes for feedstocks, polyethylene and styrene, partially offset by higher prices for styrene and higher building products sales volumes.

Westlake’s Olefins saw higher profits on a year-over-year basis in the quarter, aided by lower feedstock (ethane and propane) costs, partially offset by unrealized loss in the trading activity. The Vinyls segment of Westlake also saw higher profits on a year-over-year basis in the quarter owing to lower feedstock costs and higher caustic and building products sales volumes.

Westlake currently maintains a Zacks Rank #1 (Strong Buy).

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