Jul 9 2007
PolyOne Corporation, a leading global provider of specialized polymer materials, services and solutions, announced today that it has sold its 24 percent interest in Oxy Vinyls, LP (OxyVinyls) to Occidental Chemical Corporation (OxyChem), a wholly owned subsidiary of Occidental Petroleum Corporation.
Under the terms of the agreement, PolyOne will receive cash proceeds of $261 million for the sale of its 24 percent interest in OxyVinyls. PolyOne will immediately use the proceeds to reduce debt, including the entire outstanding balance of $141.37 million in aggregate principal amount of its 10.625 percent Senior Notes due 2010. As a result of these actions, the Company projects lower interest costs of approximately $25 million in 2008 compared to 2006.
PolyOne will retain the existing polyvinyl chloride (PVC) resin and vinyl chloride monomer (VCM) supply agreements that it entered into when OxyVinyls was formed. The terms of the supply agreements, including extensions, run through 2024. These agreements ensure consistent, cost-effective raw material supplies that will enable PolyOne to maintain its competitiveness and pursue its strategy of providing value-creating material and service solutions to its customers.
In a related transaction, the Company will acquire OxyChem's 10 percent interest in PVC Powder Blends, LP for $11 million, which will bring PolyOne's ownership of this PVC compounding operation to 100 percent.
"In one step, we have substantially strengthened our financial profile, eliminated a primary source of earnings volatility and reaffirmed our commitment to our strategy and our confidence in executing it effectively," said Stephen D. Newlin, chairman, president and chief executive officer. "This transaction rebalances our business portfolio and ensures that our core businesses become the primary driver of sustainable earnings growth."
PolyOne announced in the fourth quarter of 2006 that it had embarked upon a transformational strategy based on four key components: specialization, which shifts the basis of competition to differentiation from cost/commodity, and provides customers with high value-added solutions; globalization, which positions the Company to benefit from its extensive geographic reach; operational excellence, which strengthens PolyOne's capabilities to answer the voice of the customer by enhancing productivity, profitability and efficiency in all phases of its business; and commercial excellence, which mobilizes sales, marketing and innovation expertise to bring to market value-added products and services that provide competitive advantage to customers. Successful execution of this strategy will drive margin improvements and sustainable earnings growth.
As a result of this transaction, the Company anticipates recording an impairment on its OxyVinyls investment in the second quarter, but recording a tax benefit from the reversal of associated deferred tax liabilities upon the confirmation of the sale in the third quarter. The combination of these two factors, as well as the premium costs related to the redemption of the 2010 Senior Notes, is anticipated to result in an overall net book gain. Because of the Company's net operating loss position, the transaction will result in no cash taxes.
"I want to thank the management of OxyVinyls and OxyChem for this mutually beneficial relationship over the past eight years, and for their consistent focus on operating the business successfully," Newlin said. "We look forward to maintaining our significant commercial relationships with OxyVinyls and OxyChem."
OxyVinyls, which was formed on May 1, 1999, combined the PVC and VCM businesses of OxyChem and PolyOne to create one of North America's largest suppliers of PVC resin.