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May 1, 2007

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E-shots Web-exclusive: GE–Plastics purchased by Saudi Basic

Confirming several weeks of speculation, General Electric chairman and CEO Jeff Immelt announced Monday, May 21 that GE–Plastics will be purchased by Sabic (Saudi Basic Industries Corp.) for $11.6 billion. Sabic, the fourth-largest polyolefin producer worldwide, last year purchased the basic chemicals units of both Huntsman UK and DSM Europe, and operates Sabic Americas in Houston. Regulatory approval of the GE–Plastics sale is expected by Q3 this year.

Sources at GE–Plastics note that in the deals made to acquire both DSM and Huntsman, Sabic has continued to rely on existing management teams to run the business. Brian Gladden, who currently serves as vice president for Lexan and global products, will become president and chief executive of the new business, which Saudi Basic Industries will rename. The same sources say it is too early to conjecture about the name of the new entity. Charlene Begley, currently chief executive of GE–Plastics, will report to Jeff Immelt and assist in the transition.

Saudi Basic Industries, or Sabic, is technically a public company based in Riyadh, but the Saudi Arabian government owns 70% of its shares with the remaining 30% held by private investors in Saudi Arabia and other countries in the Persian Gulf.

In a recent news item from Reuters, Sabic was listed as the world’s largest chemical company by market value. While the company doesn’t supply its own petroleum or natural gas, it is vertically integrated with energy producer Saudi Aramco, a former U.S.-Saudi joint venture that became 100% Saudi government-owned in 1980. From this source, it is able to buy inexpensive feedstocks to produce ethylene, butadiene, and benzene.

Last year, General Electric CEO Immelt mentioned that rising costs for benzene were responsible for GE–Plastics’ lackluster performance. At a mere $674 million, 2006 profits at GEP were down 22% from 2005.

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