I've Got One Word for you Son, Plastics

If G.E. can sell its plastics division, I guess that means that abrasives might not necessarily be sacred ground at 3M. As Mr. Robinson said to Dustin Hoffman in The Graduate, "I've got one word for you son, 'plastics' ".

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G.E. Nears a Deal to Sell Plastics Unit

By ANDREW ROSS SORKIN and MICHAEL J. de la MERCED
Published: May 18, 2007

General Electric is close to reaching an agreement to sell its plastics division for about $11 billion to Saudi Arabia’s largest public company, the Saudi Basic Industries Corporation, according to people briefed on the negotiations. A deal for the G.E. division, which has 11,000 employees in 20 countries, would be one of the largest yet by the Saudi company, known as Sabic. Sabic was in a sometimes crowded race, with other top bidders being Basell, the Dutch plastics maker, and Apollo Management, the American private equity firm led by Leon Black. Negotiations were continuing last night, and it was not clear when a final agreement would be signed, people briefed on the matter said. A G.E. spokesman, Gary Sheffer, declined to comment.

Sabic is one of the world’s largest manufacturers of chemicals, fertilizers and plastics. The company reported net income of 20.3 billion riyals ($5.4 billion) last year.
People knowledgeable about the matter said that the deal might raise national security concerns. The interagency group that will review the deal, the Committee on Foreign Investments in the United States, or Cfius, derailed the sale of several port terminals to a Dubai company last year.

In selling its plastics division, based in Pittsfield, Mass., G.E. will be parting ways with one of its oldest businesses. John F. Welch Jr., the company’s former chief executive, started his career in the unit, eventually taking charge of it in 1968. G.E.’s current chief executive, Jeffrey R. Immelt, has also worked there.

Competition and price increases in raw materials have squeezed profit margins, even though the unit increased product prices. For 2006, the plastics division reported about $6.6 billion in revenue, virtually unchanged from the previous year. Profit fell to $674 million, down 22 percent from 2005.

In a regulatory filing in February announcing its 2006 earnings, G.E. said that it did not expect significant growth in the unit for 2007, and Mr. Immelt has said publicly that the company will look to invest in higher-margin specialized plastics. Among the business’s best-known products is Lexan, the high-strength plastic used in bulletproof glass, Nalgene water bottles and Apple iPods. The division is also one of the main suppliers of plastics for carmakers.