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Mexichem acquires Wavin in $1B deal

by Jonathan Braude in London  |  Published February 8, 2012 at 2:00 PM
Wavin_227x128.jpgAfter months of haggling, Mexican plastic pipes maker Mexichem SAB de CV agreed Wednesday on an offer for Wavin NV that values its Dutch peer at €761 million ($1.01 billion) including debt.

Mexichem has revised its offer three times since Wavin revealed Mexichem's first, unsolicited approach at €8.50 per share in mid-November. The successful €10.50 per share bid values Wavin's share capital at €531 million.

The drip-drip of small increases has pushed up the offer to a premium of 177% over Wavin's share price on Nov. 18 -- and to 97% over its weighted average price for the three months leading up to that date. But Mexichem, which plans to finance the deal with cash on its balance sheet and existing credit facilities, said the takeover will create the worldwide leader in plastic pipe systems with annual sales of €4 billion. It said the combination will offer opportunities for both companies to expand into new markets.

"The geographic footprint and product portfolio of Wavin and Mexichem are highly complementary, and together we will be exceptionally positioned to capitalize on growth opportunities," Mexichem executive committee president Ricardo Gutiérez Muñoz said in a Wednesday statement.

Wavin CEO Henk Ten Hove added that the agreement would allow the company to "participate in the industry consolidation and to benefit from cross-selling, sourcing power and best-practice sharing."

Wavin will retain a separate operating and legal structure, with its headquarters at Zwolle in the Netherlands, as well as its own brand and research and development operation. Mexichem has no plans to cut the workforce or restructure the company beyond Wavin's ongoing "Wavin 2015" strategy.

A spokesman for Mexichem said the buyer was not planning an immediate restructuring or repayment of Wavin's €230 million debt, but would stick to the Dutch company's plan for gradual debt reduction over the next three years. He said experience from Mexichem's previous acquisitions showed the buyer would invest in Wavin and help it expand, especially in new markets including Turkey and Spain. It would not pile on additional debt to fund expansion.

"The goal is to grow sustainability," the spokesman said.

The Wednesday statement added: "Mexichem is focused on ensuring that Wavin's key management is retained and is committed to providing them with career opportunities within the combination."

Wavin has agreed to pay a breakup fee of €8 million if it agrees to a competing bid that exceeds Mexichem's offer price by at least 3%. The buyer will pay the same amount if its own shareholders reject the bid at a specially convened meeting in March.

Barclays Capital and Citigroup Inc. are financial advisers to Mexichem, which is taking legal counsel from Allen & Overy LLP. Bank of America Merrill Lynch and Dutch law firm Stibbe are advising Wavin. ING Bank NV provided a fairness opinion to Wavin's supervisory board.
 
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Tags: chemicals | Mexichem SAB de CV | Mexico | plastics | Wavin NV
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Jonathan Braude

Senior writer, international news

Jonathan Braude is a senior writer, columnist and correspondent in the London bureau, where he covers M&A and private equity. Contact



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