Solvay and INEOS have agreed to combine their chlorvinyls businesses into a 50-50 joint venture, thereby becoming one of the largest polyvinyl chloride (PVC) producers in the world, the companies said on Tuesday.
"The newly combined business, which will be of world scale, will be able to better respond to rapidly changing European markets and to match increasing competition from global producers, said INEOS chairman Jim Ratcliffe.
Belgium-based Solvay will provide its vinyl activities -- currently part of Solvin, a joint venture between Solvay and BASF -- and its Chlor Chemicals business.
Meanwhile, Switzerland-based INEOS will contribute the chlorvinyls business of its Kerling subsidiary, which it says is Europe's largest PVC producer. It operates out of 10 sites in seven European countries.
The new INEOS-Solvay business will have 5,650 employees and combine operations across the chlorvinyls chain, including PVC, chlorine and caustic soda.
The agreement includes an exit clause where INEOS would acquire Solvays 50% stake in the venture for five and a half times its mid-cycle recurring EBITDA.
The option, which would have to be exercised within four and six years from the venture's launch, would make INEOS the sole owner of the business. Solvay would be entitled to cash payments of 250m upon deal completion.
"The joint venture will improve the competitiveness of its operations in a very challenging environment regarding feedstock and energy costs in Europe," said Jean-Pierre Clamadieu, CEO of Solvay.
"We are convinced that this is the right project to secure, for the long term, the development of Solvays European chlorvinyls activities, of its employees and its plants," he added.
The merged business would have combined net sales of 4.3bn ($5.7bn), based on 2012 results.