Saudi firm to buy GE division

DUBAI -- Saudi Basic Industries Corp., the world's biggest chemical company by market value, agreed to buy General Electric Co.'s plastics unit for $11.6 billion to gain products and operations in the United States, Asia, and Europe.

Saudi Basic, or Sabic, will pay cash for the Persian Gulf region's biggest-ever purchase. GE said yesterday it will have a gain of $1.5 billion, or about 15 cents a share. Sale proceeds will be used to increase the GE buyback this year as much as $2 billion to as much as $8 billion and fund previously revealed restructuring.

The purchase will boost Sabic's sales 29 percent from $23 billion in 2006 and give it GE's proprietary Lexan plastic, used in roofs and lighting. Sabic, based in Riyadh, Saudi Arabia, has doubled revenue since 2002, helped by access to the world's biggest reserves of oil and natural gas, both raw materials for plastics.

GE, by contrast, put the Pittsfield, Mass.-based unit up for sale in January after the soaring cost of crude cut into earnings.

"As soon as GE said the plastics business was up for grabs, this was a striking fit for Sabic," said Peter Hutton, an analyst at HSBC Holdings PLC in Riyadh with an "overweight" rating on Sabic stock. "It takes them into specialties, but not too distantly removed from where they are operating at the moment, and also gives them a material presence in the US, the world's biggest market for petrochemicals."

Sabic's operations and GE's are complimentary, he said. With the purchase, Al-Mady said his company gets technologies that took more than five decades to develop and expands in the United States, Asia, and Europe. The company plans to retain employees, he said.