SAUDI Basic Industries Corp, the world's biggest chemical firm by market value, will buy General Electric Co's plastics unit for about US$11 billion.
The information comes from two people familiar with the process, Bloomberg News reported. The companies may announce an agreement on the sale as early as today, said one person. Both people requested anonymity because the decision isn't public yet.
The price is higher than the US$8 billion to US$10 billion some investors had estimated.
CEO Jeffrey Immelt put the unit up for sale in January to get out of a volatile industry after costs for oil-based chemicals used in manufacturing cut into earnings.
Sabic in April posted its biggest quarterly profit and plans to spend US$29 billion on expansion by 2010, Moody's Investors Service said in April.
"GE is using a very favorable market to sell the asset," said Mark Demos, an analyst at Fifth Third Asset Management in Minneapolis, which owns more than 11.4 million GE shares. "They're ridding themselves of a cyclical business, and cyclical businesses don't have a big place in this company's future. Immelt's made that clear."
Sabic, Apollo Management LP and Netherlands-based Basell, a unit of New York's Access Industries Inc, were leading the bidding with prices all more than US$10 billion, people familiar with the auction process said earlier this month.
The decision was made by GE's board on Thursday, two of the people said.
Sabic Chief Financial Officer Mutlaq Al-Morished declined to comment yesterday, as did spokesmen for GE, Basell and Apollo.
GE Plastics posted US$674 million in profit on US$6.65 billion in sales in 2006. The Pittsfield, Massachusetts-based division makes plastic used in everything from compact discs and automobiles to astronaut helmets.
Sabic's advantage, should it complete the purchase, will stem from the Middle East chemical maker's access to abundant sources of raw materials such as natural gas. Sabic uses petroleum feedstock provided by state-owned Saudi Aramco, the world's biggest oil company, putting its costs lower than American-based and European chemical companies.
The online edition of The Wall Street Journal first reported on Thursday that Sabic had agreed to buy the plastics division.
Immelt and predecessor Jack Welch held management jobs early in their GE careers at the unit, which still makes products developed from founder Thomas Edison's experiments.
Since becoming GE's CEO in 2001, Immelt has agreed to US$80 billion in acquisitions to enter faster-growing areas including health care, while divesting US$35 billion of assets. .