NEW YORK--Today's rejected bid by Westlake Chemical Corporation (Westlake) to acquire Axiall Corporation (Axiall), if successful, would have been neutral to Westlake's ratings, according to Fitch Ratings. Fitch believes financial leverage and free cash flow generation would have remained within ranges consistent with Westlake's current 'BBB' rating under the terms outlined in the bid.
Westlake proposed to acquire all outstanding shares of Axiall for $20 per share. Fitch estimates the cash component of the proposed deal at roughly $780 million and assumed Axiall debt at $1.5 billion. Fitch forecasts pro forma combined total-debt-to EBITDA at 1.3x and FFO adjusted leverage at 2.0x assuming the transaction had closed Jan. 1, 2016 on the terms outlined in the announcement with no adjustment for synergies.
Fitch's view on the ratings could change if the cash portion of the bid were raised to levels requiring debt finance that would result in expected total-debt-to EBITDA above 2.0x or FFO Adjusted Leverage above 2.5x on a sustained basis.
Fitch recognizes that the combination of Westlake and Axiall would provide opportunities to maximize integration from ethylene production through polyvinyl chloride (PVC) and add scale to Westlake's PVC resin and vinyl-based building products.
Fitch currently rates Westlake as follows:
--Issuer Default Rating 'BBB';
--Senior secured ABL facility 'BBB';
--Senior unsecured notes 'BBB'.
The Rating Outlook is Stable.
Additional information is available on www.fitchratings.com.