January 15, 2007

Volume 85, Number 3

p. 13

Spin-off

GE Explores Plastics Sale

A sale would follow divestment of silicones business last year

Alex Tullo

General Electric has contacted private-equity companies and competing plastics firms regarding the possible sale of GE Plastics for as much as $10 billion, according to reports in the New York Times and Wall Street Journal.

To manage the sale, GE is said to have retained Goldman Sachs, which the reports say has already contacted two plastics companies and four private-equity firms.

GE told C&EN that it has "no comment on rumors or speculation" about the business, which makes engineering polymers such as polycarbonate, polyphenylene oxide, and acrylonitrile-butadiene-styrene (ABS). But CEO Jeffrey Immelt has been dancing around the issue of a sale of the plastics business since GE agreed to a $3.8 billion sale of its silicones and quartz business, GE Advanced Materials, to Apollo Management last September.

During a conference call last October, Immelt reminded analysts that "there is no business that's off limits." And hinting that the industry has become more mature than it once was, he added, "Clearly, plastics has changed dramatically in the last 10 years." GE Plastics had sales of $6.6 billion in 2005.

C. Stephen Tusa Jr., a stock analyst with JPMorgan Securities, is receptive to GE's apparent decision. "The fact that GE is seeking strategic alternatives for its plastics unit is not a surprise, but the move is positive nonetheless," he wrote in a recent report to clients.

Austin Peppin, a plastics consultant with Chesterfield, Mo.-based BRG Peppin, figures that a private-equity purchase of GE Plastics is more likely than a merger with an industry player. "If I was to put my money on it, I would favor a private-equity firm," he says.

GE has a roughly 30% global market share in polycarbonate, Peppin says, which would likely rule out polycarbonate competitors Bayer and Dow Chemical as prospective buyers.

Chemical & Engineering News

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