Saudis buy GE plastics arm in $11bn deal

General Electric is offloading its ailing plastics division in an $11bn (£5.6bn) deal that is the largest ever completed in the Gulf.

The division is being bought by Basic Industries of Saudi Arabia, one of the world's largest chemicals companies, which is 70pc-owned by the Saudi government.

The price tag is far higher than the $8bn-$10bn analysts had expected. The unit has been on the market since January after high crude oil prices cut into GE's earnings. Sabic, as the Saudi company is known, has easy access to the world's largest oil reserves.

GE is expected to pump the proceeds of the sale into more stable earnings streams such as its healthcare business.

GE Plastics posted a profit of $674m on sales of $6.65bn last year. It specialises in polycarbonates - easily-worked plastics used in applications ranging from riot shields to compact-disc cases.

GE's proprietary Lexan plastic is used in roofs, lighting, walkways, windows and domes. It operates in 21 countries around the world, including the fast-growing markets of China, India and Brazil.

Sabic's investments in capacity expansion are expected to reach $20bn by 2009 as it seeks to move beyond its Saudi Arabian base and establish manufacturing facilities closer to its customers.

The late King Khalid bin Abdulaziz established Sabic in 1976 with the aim making Saudi Arabia less dependent on oil.

It has grown to employ 17,000 people.
Source : http://www.telegraph.co.uk