Westlake Chemical Corporation Case Study

1691 Words 7 Pages
Introduction Hostile takeover proposals increased in 2015, worth over 14% of all mergers and acquisitions transactions (Wieczner, 2015). The same trend continued in 2016 as more companies continued to pursue hostile takeover plans. Hostile takeovers occur when corporate managers propose to buy the entire stock of the targeted company at a low price and restructure the company. Through restructuring, most employees lose their jobs and most assets are disposed to make the balance sheet attractive. The share price of the acquired company then rises, and the corporate raiders enjoy higher market value of their new company.
Westlake Chemical Corporation’s Hostile Takeover of Axiall Corporation
In early 2016, the Houston-based chemical company,
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After the rejection of the proposal by Axiall’s management, Westlake made a proposal to the company’s shareholders through the board of directors. The proposal highlighted the benefits of the takeover to the company’s shareholders. They suggested that the standalone strategic plan of Axiall may not deliver the value and upside of the takeover proposal. Westlake managers also suggest that the challenging environment poses significant uncertainties and risks to the Axiall shareholders. The combined company would solve these problems by enhancing a stronger financial profile, ability to seize future investment opportunities, ability to serve customers more effectively, and improved financial flexibility. Westlake Corporation also wrote a letter to employees to inform them of these benefits and urge them to avoid discussing the proposal with outsiders.
The takeover was completed in August at $33 per share, a total of $3.8 billion including debt and liabilities. The acquisition was received by shareholders as a crucial way to enhance financial and operational flexibility and accelerate
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The company recorded $4.6 billion revenue in 2015, and a balance sheet asset value of $4.5 billion (Securities and Exchange Commission, 2015). The company also has a large competent employee base and a strong strategic plan led by a competent team of management. The company also has a strong marketing network operating globally, hence reaching wide market coverage.
The company made losses of approximately $837 million (Securities and Exchange Commission, 2015). It also has a huge debt of 1.3 billion which creates a negative image on its balance sheet. Shareholders’ value is also low as the share price was only $9 in January before the takeover bid from Westlake.
There are opportunities of growth in the manufacturing industry through acquisitions, strategic alliance, and partnerships. There are also opportunities in new investments in new business portfolios. Furthermore, technological advancements in manufacturing industry give an opportunity of improving operations and serving customers more

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