Riyadh-based chemicals company Saudi Basic Industries Corp is in the lead to buy General Electric Co's plastics business, a source familiar with the situation said on Friday. The Wall Street Journal said bidding for the business was approaching $11 billion.
GE placed the Plastics unit, where profit last year slipped 22 percent to $674 million, on the block in January. GE and Sabic declined to comment. According to sources, Dutch petrochemicals maker Basell and private-equity firm Apollo Management are also in the running for the business, which last year generated $6.65 billion in revenue.
Fairfield, Connecticut-based GE decided to sell the slow-growing plastics business as part of its effort to focus on faster-growth industries. It put plastics up for sale after starting the year by negotiating $15 billion in take-overs, including parts of health-care company Abbott Laboratories Inc, the aerospace business of Britain's Smiths Group Plc and privately held oil and gas field equipment maker Vetco Gray.
The main question surrounding the deal is how much GE would be able to raise through the sale. "We believe that any deal with gross proceeds in excess of $10 billion would be positive for sentiment," wrote Deutsche Bank analyst Nigel Coe in a May 15 note to clients. He noted that a price above $10 billion would help ease some investor concerns that GE may have overpaid in some of the large deals it struck early this year.
GE, the world's second-largest company by market capitalisation behind Exxon Mobil Corp, has close ties to the Saudi government. In December and January alone the company received about $2 billion in orders for Saudi infrastructure projects.
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