Ineos talks Solvay PVC joint venture

Craig Welsh, business communications for Ineos, told PlasticsToday a recent study carried out on behalf of Ineos ChlorVinyls and Solvay indicated that significant synergy benefits could be obtained through the combination of their respective chlorvinyls businesses.

"As is well known, the European PVC sector has for some time been and continues to be under significant pressure from reduced market demand and increasing raw materials costs," Welsh said.

The combined business would have around 5650 employees across nine countries and would pool each company's assets across the entire chlorvinyls chain. This includes PVC, which is the third most-used plastic in the world, caustic soda and chlorine derivatives.

Welsh anticipated there would be significant synergy benefits available in several key areas: the combination of two organizations into one, logistics cost savings, and the sharing of best practice between the two businesses in areas such as cost management, raw materials purchasing and technology.

Solvay would contribute its vinyl activities, as well as its Chlor chemicals business, spread across seven fully integrated production sites in Europe. These sites include five electrolysis units converted into membrane technology, which the company says supports sustainable production of PVC.

Kerling, the subsidiary of Ineos and the largest PVC producer in Europe, would contribute its chlorvinyls and related businesses that include three large-scale membrane electrolysis units.

However, Solvay plans to exit the PVC business and its 50% share in the venture by the end of the decade. Within four to six years, Ineos will acquire Solvay's 50% interest in the joint venture based on a mid-cycle REBITDA multiple of 5.5x. Solvay would be entitled to receive upfront cash payments of EUR 250 million upon completion of the transaction.

In the news release, Solvay CEO Jean-Pierre Clamadieu called the proposed partnership an "ambitious and value-creating industrial project."

"We are convinced that this is the right project to secure, for the long term, the development of Solvay's European chlorvinyls activities, of its employees and its plants," he stated. "Furthermore, this transaction would substantially change our portfolio of activities and allow us to accelerate Solvay's transformation into a chemical group focused on growth and high-margin businesses."

The proposed transaction is subject to the applicable information and consultation procedures with employee representatives in the countries involved. Until completion of the transaction, Solvay and Ineos will continue to run their PVC businesses separately. 

"This agreement will result in the creation of a truly competitive and sustainable business that will provide significant benefit to customers, such as reliable access to PVC," said Jim Ratcliffe chairman of Ineos AG. "The newly combined business, which will be of world scale, will be able to better respond to rapidly changing European markets and to match increasing competition from global producers."