Westlake to Acquire Hexion’s Global Epoxy Business for $1.2B; Shares Rise 2.7%

Petrochemicals, polymers and fabricated building products manufacturer and supplier Westlake Chemical Corporation (WLK) recently revealed that it has entered into a definitive agreement to acquire Hexion Inc.’s global epoxy business for $1.2 billion. The deal is likely to close in the first half of 2022.

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Following the news, shares of the company gained 2.7% to close at $102.40 on Wednesday.

Implications of the Deal

With significant expertise in the manufacturing and development of specialty resins, coatings and composites for a variety of industries, the addition of Hexion’s epoxy business will allow Westlake to significantly expand its integrated business by adding a downstream portfolio of coatings and composite products to its chloro-vinyls businesses.

Notably, in the past 12 months, ended September 30, 2021, Hexion’s epoxy business has generated net sales of roughly $1.5 billion.

Management Commentary

The CEO of Westlake, Albert Chao, said, “The industries served by Hexion Epoxy are very attractive to Westlake and the business is expected to be a synergistic addition to Westlake’s existing businesses. We look forward to welcoming the Hexion epoxy employees to the Westlake family and realizing the tremendous opportunities to grow the combined businesses.”

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Price Target

Recently, Goldman Sachs analyst Robert Koort reiterated a Hold rating on the stock. The analyst, however, raised the price target from $111 to $123, which implies upside potential of 20.1% from current levels.

The Wall Street community is cautiously optimistic about the stock and has a Moderate Buy consensus rating based on 5 Buys and 4 Holds. The average Westlake price target of $123.25 implies that the stock has upside potential of 20.4% from current levels.

Smart Score

Westlake scores a “Perfect 10” from TipRanks’ Smart Score rating system, indicating that the stock is likely to outperform market expectations. Shares have gained 31.6% over the past year.