S-4/A 1 d403924ds4a.htm S-4/A S-4/A
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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 27, 2012

REGISTRATION NO. 333-183727

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 4

to

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

EAGLE SPINCO INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   2821   46-0769929

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

One PPG Place

Pittsburgh, Pennsylvania 15272

(412) 434-3131

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

Michael H. McGarry

President

Eagle Spinco Inc.

One PPG Place

Pittsburgh, Pennsylvania 15272

(412) 434-3131

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

Steven A. Rosenblum, Esq.

Wachtell, Lipton, Rosen & Katz

51 West 52nd Street

New York, New York 10119

(212) 403-1221

 

Timothy Mann, Jr.

Executive Vice President, General

Counsel and Secretary

Georgia Gulf Corporation

115 Perimeter Center Place

Suite 460

Atlanta, Georgia 30346

(770) 395-4500

 

Mark L. Hanson, Esq.

Jones Day

1420 Peachtree Street, N.E.

Suite 800

Atlanta, Georgia 30309

(404) 521-3939

 

 

Approximate date of commencement of proposed sale of the securities to the public: As soon as possible following the effective date of the registration statement and satisfaction or waiver of all other conditions to the consummation of the Exchange Offer.

If the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  x

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):

 

 

Large accelerated filer  ¨      Accelerated filer   ¨
Non-accelerated filer    x   (Do not check if a smaller reporting company)    Smaller reporting company   ¨


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CALCULATION OF REGISTRATION FEE

 

 

 

Title of each class of

securities to be registered

   Amount
to be
registered(1)
     Proposed
maximum
offering price
per unit(2)
     Proposed
maximum
aggregate
offering price(2)
     Amount of
registration fee(2)
 

Common stock, par value $.001 share

     35,399,750       $ 41.99       $ 1,486,435,503       $ 155,495   

 

 

 

(1) Represents the number of shares of Eagle Spinco Inc. common stock, par value $.001 per share, estimated to be issuable upon completion of the transactions contemplated by the Agreement and Plan of Merger between PPG Industries, Inc., Eagle Spinco Inc., Georgia Gulf Corporation and Grizzly Acquisition Sub, Inc. dated as of July 18, 2012, as amended, as described in this registration statement. The exact number of shares of Eagle Spinco Inc. common stock issuable in the Merger (as defined herein) is equal to the greater of (a) 35,200,000 shares or (b) the product of (1) the number of shares of Georgia Gulf Corporation common stock issued and outstanding immediately prior to the effective time of the Merger, multiplied by (2) 1.02020202, subject to adjustment under certain circumstances. Pursuant to Rule 416 under the Securities Act of 1933, as amended, this registration statement also covers an indeterminate number of additional shares of Eagle Spinco Inc. common stock as may be issuable as a result of stock splits, stock dividends or the like.
(2) Calculated pursuant to Rule 457(c) and Rule 457(f) under the Securities Act of 1933, as amended, based on the average of the high and low prices of shares of common stock of Georgia Gulf Corporation, into which shares of common stock of Eagle Spinco Inc. will be converted, as reported on the New York Stock Exchange on December 26, 2012. The filing fee applicable to the offering of common stock of Eagle Spinco Inc. in the transactions contemplated by the Agreement and Plan of Merger, dated as of July 18, 2012, by and among PPG Industries, Inc., Eagle Spinco Inc., Georgia Gulf Corporation and Grizzly Acquisition Sub, Inc., as amended, was paid in connection with Georgia Gulf Corporation’s Registration Statement on Form S-4, which was filed on September 5, 2012 (Registration No. 333-183724), Amendment No. 1 to Georgia Gulf Corporation’s Registration Statement on Form S-4, which was filed on October 18, 2012 and Amendment No. 4 to Georgia Gulf Corporation’s Registration Statement on Form S-4, which was filed on December 27, 2012, calculated as set forth therein. Because the shares of common stock of Eagle Spinco Inc. that will be exchanged for shares of common stock of Georgia Gulf Corporation (or distributed to eligible shareholders of PPG Industries, Inc. in a pro rata distribution, if any) will immediately be converted into shares of common stock of Georgia Gulf Corporation pursuant to the Merger Agreement, Eagle Spinco Inc. has not remitted a separate filing fee.

 

 

The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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EXPLANATORY NOTE

Eagle Spinco Inc. (“Splitco”), which is a subsidiary of PPG Industries, Inc. (“PPG”), is filing this registration statement on Form S-4 and Form S-1 (Reg. No. 333-183727) to register shares of its common stock, par value $0.001 per share, which will be distributed to PPG shareholders pursuant to a split-off in connection with the merger (the “Merger”) of Grizzly Acquisition Sub, Inc., a Delaware corporation (“Merger Sub”), which is a wholly-owned subsidiary of Georgia Gulf Corporation (“Georgia Gulf”), with and into Splitco, whereby the separate corporate existence of Merger Sub will cease and Splitco will continue as the surviving company and a wholly-owned subsidiary of Georgia Gulf. Prior to the Merger, PPG will transfer the assets and liabilities related to the PPG Chlor-alkali and Derivatives Business, including certain subsidiaries of PPG, to Splitco or one of its subsidiaries. In exchange therefor, PPG will receive all the issued and outstanding common stock of Splitco, the cash proceeds of approximately $225.0 million from the Term Facility (as defined below) and the Debt Securities (as defined below) in an aggregate principal amount of approximately $675.0 million. Splitco is a newly formed, direct wholly-owned subsidiary of PPG that was organized specifically for the purpose of effecting the Separation (as defined below). Splitco has engaged in no business activities to date, and it has no material assets or liabilities of any kind, other than those incident to its formation and those incurred in connection with the Transactions (as defined below). The shares of Splitco common stock will be immediately converted into shares of Georgia Gulf common stock in the Merger. Georgia Gulf has filed a proxy statement that relates to the special meeting of stockholders of Georgia Gulf to approve the issuance of shares of Georgia Gulf common stock in the Merger. In addition, Georgia Gulf has filed a registration statement on Form S-4 (Reg. No. 333-183724) to register the shares of its common stock, par value $0.01 per share, which will be issued in the Merger.

In the split-off, PPG will offer its shareholders the option to exchange their shares of PPG common stock for shares of Splitco common stock in an exchange offer, which shares will immediately be exchanged for shares of Georgia Gulf common stock in the Merger, resulting in a reduction in PPG’s outstanding shares. If the exchange offer is undertaken and consummated but the exchange offer is not fully subscribed because less than all shares of Splitco common stock owned by PPG are exchanged, the remaining shares of Splitco common stock owned by PPG will be distributed on a pro rata basis to PPG shareholders whose shares of PPG common stock remain outstanding after consummation of the exchange offer. Any PPG shareholder who validly tenders (and does not properly withdraw) shares of PPG common stock for shares of Splitco common stock in the exchange offer will waive their rights with respect to such shares to receive, and forfeit any rights to, shares of Splitco common stock distributed on a pro rata basis to PPG shareholders in the event the exchange offer is not fully subscribed.


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The information in this document may change. The exchange offer and issuance of securities being registered pursuant to the registration statement of which this document forms a part may not be completed until the registration statement is effective. This document is not an offer to sell these securities, and it is not soliciting an offer to buy these securities, in any state where such offer or sale is not permitted.

 

SUBJECT TO COMPLETION DATED DECEMBER 27, 2012

PRELIMINARY PROSPECTUS—OFFER TO EXCHANGE

PPG INDUSTRIES, INC.

Offer to Exchange All Shares of Common Stock of

EAGLE SPINCO INC.

which are owned by PPG Industries, Inc.

and will be converted into Shares of Common Stock of

GEORGIA GULF CORPORATION

for

Shares of Common Stock of PPG Industries, Inc.

 

 

PPG Industries, Inc. (“PPG”) is offering to exchange all shares of common stock of Eagle Spinco Inc. (“Splitco common stock”) which are owned by PPG for shares of common stock of PPG (“PPG common stock”) that are validly tendered and not properly withdrawn. The number of shares of PPG common stock that will be accepted if this exchange offer is completed will depend on the final exchange ratio, the number of shares of Splitco common stock offered and the number of shares of PPG common stock tendered; provided that PPG will only accept up to 80,000,000 shares of PPG common stock in this exchange offer (the “Maximum Amount”). The terms and conditions of this exchange offer are described in this document, which you should read carefully. None of PPG, Eagle Spinco Inc. (“Splitco”), any of their respective directors or officers or any of their respective representatives makes any recommendation as to whether you should participate in this exchange offer. You must make your own decision after reading this document and consulting with your advisors.

Immediately following consummation of this exchange offer, a special purpose merger subsidiary of Georgia Gulf Corporation (“Georgia Gulf”) named Grizzly Acquisition Sub, Inc., a Delaware corporation (“Merger Sub”), will be merged with and into Splitco, whereby the separate corporate existence of Merger Sub will cease and Splitco will continue as the surviving company and a wholly-owned subsidiary of Georgia Gulf (the “Merger”). In the Merger, each share of Splitco common stock (except shares of Splitco common stock held by Splitco as treasury stock) will be converted into the right to receive a number of shares of common stock of Georgia Gulf (“Georgia Gulf common stock”) equal to (a) the greater of (i) 35,200,000 shares of Georgia Gulf common stock or (ii) the product of (x) the number of shares of Georgia Gulf common stock issued and outstanding immediately prior to the effective time of the Merger multiplied by (y) 1.02020202, divided by (b) the number of shares of Splitco common stock issued and outstanding immediately prior to the effective time of the Merger (subject to adjustment in certain circumstances). Pursuant to an amendment to the Merger Agreement dated August 31, 2012, Splitco will authorize the issuance of a number of shares of Splitco common stock such that the total number of shares of Splitco common stock outstanding immediately prior to the Merger will be that number that results in the exchange ratio in the Merger equaling one. As a result, each share of Splitco common stock (except shares of Splitco common stock held by Splitco as treasury stock) will be converted into one share of Georgia Gulf common stock in the Merger. Georgia Gulf expects to issue approximately 35,236,010 shares of Georgia Gulf common stock in the Merger. Accordingly, shares of Splitco common stock will not be transferred to participants in this exchange offer; such participants will instead receive shares of Georgia Gulf common stock in the Merger. No trading market currently exists or will ever exist for shares of Splitco common stock. You will not be able to trade the shares of Splitco common stock before they are exchanged for shares of Georgia Gulf common stock in the Merger. There can be no assurance, however, that shares of Georgia Gulf common stock when issued in the Merger will trade at the same prices as shares of Georgia Gulf common stock are traded prior to the Merger.

The value of PPG common stock and Splitco common stock will be determined by PPG by reference to the simple arithmetic average of the daily volume–weighted average prices (“VWAP”) on each of the Valuation Dates (as defined below), of PPG common stock and the Georgia Gulf common stock on the New York Stock Exchange (“NYSE”) on each of the last three trading days (“Valuation Dates”) of the exchange offer period (not including the expiration date), as it may be voluntarily extended, but not including the last two trading days that are part of any Mandatory Extension (as described below). Based on an expiration date of January 28, 2013, the Valuation Dates are expected to be January 23, 2013, January 24, 2013, and January 25, 2013. See “This Exchange Offer—Terms of this Exchange Offer.”

This exchange offer is designed to permit you to exchange your shares of PPG common stock for shares of Splitco common stock at a 10% discount to the per-share value of Georgia Gulf common stock, calculated as set forth in this document. For each $1.00 of PPG common stock accepted in this exchange offer, you will receive approximately $1.11 of Splitco common stock, subject to an upper limit of 3.9745 shares of Splitco common stock per share of PPG common stock. This exchange offer does not provide for a minimum exchange ratio. See “This Exchange Offer—Terms of this Exchange Offer.” If the upper limit is in effect, then the exchange ratio will be fixed at that limit and this exchange offer will be automatically extended (a “Mandatory Extension”) until 8:00 a.m. New York City time, on the day after the second trading day following the last trading day prior to the originally contemplated expiration date to permit shareholders to tender or withdraw their PPG common stock during that period. IF THE UPPER LIMIT IS IN EFFECT, AND UNLESS YOU PROPERLY WITHDRAW YOUR SHARES, YOU WILL RECEIVE LESS THAN $1.11 OF SPLITCO COMMON STOCK FOR EACH $1.00 OF PPG COMMON STOCK THAT YOU TENDER, AND YOU COULD RECEIVE MUCH LESS.

The indicative exchange ratio that would have been in effect following the official close of trading on the NYSE on December 26, 2012 (the last trading day before the date of this document), based on the daily VWAPs of PPG common stock and Georgia Gulf common stock on December 21, 2012, December 24, 2012, and December 26, 2012, would have provided for 3.5329 shares of Splitco common stock to be exchanged for every share of PPG common stock accepted. The value of Splitco common stock received and, following the Merger, the value of Georgia Gulf common stock received may not remain above the value of PPG common stock tendered following the expiration date of this exchange offer.

THIS EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 8:00 A.M., NEW YORK CITY TIME, ON JANUARY 28, 2013, UNLESS THE OFFER IS EXTENDED OR TERMINATED. SHARES OF PPG COMMON STOCK TENDERED PURSUANT TO THIS EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION OF THIS EXCHANGE OFFER.

 

 

In reviewing this document, you should carefully consider the risk factors beginning on page 42 of this document.

Neither the Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of these securities or determined if this Prospectus—Offer to Exchange is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this Prospectus—Offer to Exchange is                     , 2012.


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Unless there is a Mandatory Extension, the final exchange ratio used to determine the number of shares of Splitco common stock that you will receive for each share of PPG common stock accepted in this exchange offer will be announced by press release no later than 4:30 p.m., New York City time, on the last trading day prior to the expiration date. At such time, the final exchange ratio will be available at http://www.edocumentview.com/PPGINDUSTRIES and from the information agent at the toll–free number provided on the back cover of this document. PPG will announce whether the upper limit on the number of shares that can be received for each share of PPG common stock tendered will be in effect at the expiration of the exchange offer period, through http://www.edocumentview.com/PPGINDUSTRIES and by press release, no later than 4:30 p.m., New York City time, on the last trading day prior to the expiration date. Throughout this exchange offer, indicative exchange ratios (calculated in the manner described in this document) will also be available on that website and from the information agent at the toll–free number provided on the back cover of this document.

This document provides information regarding PPG, Splitco, Georgia Gulf, the exchange offer and the Merger in which shares of PPG common stock may be exchanged for shares of Splitco common stock which will then be immediately exchanged for shares of Georgia Gulf common stock and distributed to participating PPG shareholders as described herein. PPG common stock is listed on the NYSE under the symbol “PPG.” Georgia Gulf common stock is listed on the NYSE under the symbol “GGC.” On December 26, 2012, the last reported sale price of PPG common stock on the NYSE was $134.74, and the last reported sale price of Georgia Gulf common stock on the NYSE was $41.82. The market prices of PPG common stock and of Georgia Gulf common stock will fluctuate prior to the completion of this exchange offer and thereafter and may be higher or lower at the expiration date than the prices set forth above. No trading market currently exists for shares of Splitco common stock, and no such market will exist in the future. Splitco has not applied for listing of its common stock on any exchange.

If this exchange offer is consummated but this exchange offer is not fully subscribed because less than all the shares of Splitco common stock owned by PPG are exchanged, the remaining shares of Splitco common stock owned by PPG will be distributed to PPG shareholders whose shares of PPG common stock remain outstanding after the consummation of the exchange offer pursuant to a pro rata distribution (a “spin-off”) that would also be consummated on the closing date of the Merger. Any PPG shareholder who validly tenders (and does not properly withdraw) shares of PPG common stock for shares of Splitco common stock in the exchange offer will waive their rights with respect to such shares to receive, and forfeit any rights to, shares of Splitco common stock distributed on a pro rata basis to PPG shareholders in the event the exchange offer is not fully subscribed. This document covers all shares of Splitco common stock offered by PPG in this exchange offer and all shares of Splitco common stock that may be distributed by PPG as a spin-off to holders of PPG common stock. If this exchange offer is terminated by PPG without the exchange of shares (but the conditions for consummation of the Transactions have otherwise been satisfied), all shares of Splitco common stock owned by PPG will be distributed in a spin-off to holders of PPG. See “This Exchange Offer—Distribution of Any Shares of Splitco Common Stock Remaining After This Exchange Offer.”

Immediately following consummation of this exchange offer, in the Merger, Merger Sub will be merged with and into Splitco, whereby the separate corporate existence of Merger Sub will cease and Splitco will continue as the surviving company and a wholly-owned subsidiary of Georgia Gulf. Each share of Splitco common stock (except shares of Splitco common stock held by Splitco as treasury stock) will be converted into the right to receive a number of shares of Georgia Gulf common stock equal to (a) the greater of (i) 35,200,000 shares of Georgia Gulf common stock or (ii) the product of (x) the number of shares of Georgia Gulf common stock issued and outstanding immediately prior to the effective time of the Merger multiplied by (y) 1.02020202, divided by (b) the number of shares of Splitco common stock issued and outstanding immediately prior to the effective time of the Merger (subject to adjustment in certain circumstances). Immediately after the Merger, at least 50.5% of the shares of Georgia Gulf common stock are expected to be held by pre-Merger holders of Splitco common stock and no more than 49.5% of the shares of Georgia Gulf common stock are expected to be held by pre-Merger Georgia Gulf stockholders.

PPG’s obligation to exchange shares of Splitco common stock for Georgia Gulf common stock is subject to the conditions listed under “This Exchange Offer—Conditions for Consummation of this Exchange Offer,” including the satisfaction of conditions to the Merger, which include the Georgia Gulf stockholder approval of the issuance of Georgia Gulf common stock in connection with the Merger, and other conditions.


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TABLE OF CONTENTS

 

     Page  

HELPFUL INFORMATION

     1   

QUESTIONS AND ANSWERS ABOUT THIS EXCHANGE OFFER AND THE TRANSACTIONS

     4   

Questions and Answers About This Exchange Offer

     4   

Questions and Answers About the Transactions

     12   

SUMMARY

     17   

The Companies

     17   

The Transactions

     18   

Number of Shares of Splitco Common Stock to Be Distributed to PPG Shareholders

     22   

Terms of this Exchange Offer

     22   

Debt Financing

     28   

Board of Directors and Management of Georgia Gulf Following the Transactions

     28   

Georgia Gulf Stockholder Vote

     29   

Accounting Treatment and Considerations

     29   

Material U.S. Federal Income Tax Consequences of the Distribution and the Merger

     29   

SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA

     31   

Summary Historical Combined Financial Data of the PPG Chlor-alkali and Derivatives Business

     31   

Summary Historical Consolidated Financial Data of PPG

     32   

Summary Historical Consolidated Financial Data of Georgia Gulf

     34   

Summary Unaudited Pro Forma Condensed Consolidated Financial Information of PPG Reflecting the Transactions

     35   

Summary Unaudited Pro Forma Condensed Combined Financial Information of Georgia Gulf and the PPG  Chlor-alkali and Derivatives Business

     37   

Summary Comparative Historical and Pro Forma Per Share Data

     39   

Historical Common Stock Market Price and Dividend Data

     40   

RISK FACTORS

     42   

Risks Related to the Transactions

     42   

Other Risks that Relate to Georgia Gulf, Including the PPG Chlor-alkali and Derivatives Business After the Transactions

     49   

CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

     62   

THIS EXCHANGE OFFER

     63   

Terms of this Exchange Offer

     63   

Conditions for Consummation of this Exchange Offer

     77   

Material U.S. Federal Income Tax Consequences of the Distribution and the Merger

     79   

Treatment of Specified PPG Compensatory Equity-Based Awards Held by Current Splitco Employees

     82   

Fees and Expenses

     83   

Legal Limitations

     83   

Certain Matters Relating to Non-U.S. Jurisdictions

     83   

Distribution of Any Shares of Splitco Common Stock Remaining After This Exchange Offer

     84   

INFORMATION ON GEORGIA GULF

     85   

Overview

     85   

Georgia Gulf’s Business After the Transactions

     85   

Georgia Gulf’s Liquidity and Capital Resources After the Transactions

     86   

Directors and Officers of Georgia Gulf Before and After the Transactions

     88   

INFORMATION ON PPG

     91   

Performance Coatings, Industrial Coatings and Architectural Coatings—EMEA

     91   

Optical and Specialty Materials

     92   

Commodity Chemicals

     92   

Glass

     92   

INFORMATION ON THE PPG CHLOR-ALKALI AND DERIVATIVES BUSINESS

     93   

General

     93   

 

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Products

     93   

Manufacturing and Facilities

     94   

Sales and Distribution

     95   

Raw Materials and Energy

     95   

Research and Development

     95   

Seasonality

     96   

Competition

     96   

Regulation and Environmental Matters

     96   

Legal Proceedings

     98   

Employees

     99   

Board of Directors

     99   

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE PPG CHLOR-ALKALI AND DERIVATIVES BUSINESS

     100   

Overview

     100   

Separation of the PPG Chlor-alkali and Derivatives Business from PPG Industries, Inc.

     100   

Results of Operations

     101   

Performance in 2011 Compared with 2010

     102   

Performance in 2010 Compared with 2009

     104   

Liquidity and Capital Resources

     104   

Off-Balance Sheet Arrangements

     105   

Quantitative and Qualitative Disclosures About Market Risk

     105   

Contractual Obligations

     106   

Critical Accounting Estimates

     106   

SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA

     108   

Selected Historical Combined Financial Data of the PPG Chlor-alkali and Derivatives Business

     108   

Selected Consolidated Historical Financial Data of PPG

     108   

Selected Historical Consolidated Financial Data of Georgia Gulf

     109   

Retroactive Presentation for Change in Accounting Principles

     112   

Unaudited Pro Forma Condensed Consolidated Financial Statements of PPG Reflecting the Transactions

     113   

Unaudited Pro Forma Condensed Combined Financial Statements of Georgia Gulf and the PPG Chlor-alkali and Derivatives Business

     118   

HISTORICAL PER SHARE DATA, MARKET PRICE AND DIVIDEND DATA

     130   

Comparative Historical and Pro Forma Per Share Data

     130   

Historical Common Stock Market Price and Dividend Data

     130   

Georgia Gulf Dividend Policy

     131   

PPG Dividend Policy

     131   

THE TRANSACTIONS

     132   

Determination of Number of Shares of Splitco Common Stock to be Distributed to PPG Shareholders

     136   

Background of the Transactions

     136   

Georgia Gulf’s Reasons for the Transactions

     143   

Georgia Gulf’s Stockholders Meeting

     161   

PPG’s Reasons for the Transactions

     161   

Interests of Certain Persons in the Transactions

     162   

Accounting Treatment of the Merger

     162   

Regulatory Approvals

     163   

Federal Securities Law Consequences; Resale Restrictions

     163   

No Appraisal or Dissenters’ Rights

     163   

THE MERGER AGREEMENT

     164   

The Merger

     164   

Closing; Effective Time

     164   

Merger Consideration

     165   

Issuance of Splitco Common Stock to PPG

     166   

 

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Distribution of Per Share Merger Consideration

     166   

Treatment of PPG Equity Awards

     167   

Distribution With Respect to Shares of Georgia Gulf Common Stock After the
Effective Time of the Merger

     167   

Termination of the Distribution Fund

     167   

Post-Closing Georgia Gulf Board of Directors and Officers

     168   

Stockholders Meeting

     168   

Representations and Warranties

     168   

Conduct of Business Pending Closing

     171   

Tax Matters

     175   

SEC Filings

     175   

Regulatory Matters

     175   

No Solicitation

     176   

Board Recommendation

     178   

Financing

     179   

Covenant Not to Compete

     181   

Non-Solicitation of Employees

     182   

Certain Other Covenants and Agreements

     182   

Conditions to the Merger

     183   

Termination

     185   

Termination Fee Payable in Certain Circumstances

     186   

Expenses

     186   

Specific Performance

     187   

Other Transaction Agreements

     187   

Amendments

     187   

THE SEPARATION AGREEMENT

     188   

Overview

     188   

Issuance of Splitco Common Stock to PPG Shareholders

     188   

Transfer of the Assets and Assumption of Liabilities

     188   

Transfer of the PPG Chlor-alkali and Derivatives Business

     193   

Intercompany Arrangements and Guarantees

     193   

Consents and Delayed Transfers

     194   

Shared Contracts

     194   

Transfer of the TCI Interests

     195   

No Representations or Warranties

     195   

Mutual Releases and Indemnification

     195   

Post-Closing Working Capital Adjustment

     197   

Covenants

     197   

Conditions to the Separation and Distribution

     198   

Termination

     198   

Parties in Interest

     198   

DEBT FINANCING

     199   

Senior Secured Term Loan Facility

     199   

Splitco Debt Securities

     201   

PPG Bridge Facility

     201   

Debt Exchange

     202   

Exchange Loans and Exchange Notes

     203   

New ABL Revolver

     203   

OTHER AGREEMENTS

     204   

Employee Matters Agreement

     204   

Tax Matters Agreement

     206   

Transition Services Agreement

     207   

 

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Shared Facilities, Services and Supply Agreement

     208   

Servitude Agreement

     208   

The Electric Generation, Distribution and Transmission Facilities Lease

     208   

Chlorine, Liquid Caustic Soda and Hydrochloric Acid Sales Agreements

     209   

Monroeville Shared Facilities Agreement

     209   

Master Terminal Agreement

     209   

Chlorine Sales Agreement Amendment

     209   

DESCRIPTION OF GEORGIA GULF CAPITAL STOCK

     211   

OWNERSHIP OF GEORGIA GULF COMMON STOCK

     214   

COMPARISON OF RIGHTS OF HOLDERS OF PPG COMMON STOCK AND GEORGIA GULF COMMON STOCK

     216   

Authorized Capital Stock

     216   

Certain Anti-Takeover Effects of Provisions of the GGC Articles, the GGC Bylaws and Delaware Law

     224   

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     224   

LEGAL MATTERS

     224   

EXPERTS

     224   

WHERE YOU CAN FIND MORE INFORMATION; INCORPORATION BY REFERENCE

     225   

INDEX TO FINANCIAL PAGES

     F-1   

ANNEXES

  

Opinion of Barclays Capital Inc.

     A-1   

Opinion of Houlihan Lokey Financial Advisors, Inc.

     B-1   

This document incorporates by reference important business and financial information about PPG and Georgia Gulf from documents filed with the U.S. Securities and Exchange Commission (“SEC”) that have not been included in or delivered with this document. This information is available at the website that the SEC maintains at www.sec.gov, as well as from other sources. See “Where You Can Find More Information; Incorporation By Reference.” You also may ask any questions about this exchange offer or request copies of the exchange offer documents from PPG, without charge, upon written or oral request to PPG’s information agent, Georgeson Inc., located at 199 Water Street, 26th Floor, New York, New York 10038-3560 or at telephone number (212) 440-9800 (for banks and brokers) and (888) 624-2255 (for all other callers). In order to receive timely delivery of the documents, you must make your requests no later than January 21, 2013.

All information contained or incorporated by reference in this document with respect to Georgia Gulf and Merger Sub and their respective subsidiaries, as well as information on Georgia Gulf after the consummation of the Transactions, has been provided by Georgia Gulf. All other information contained or incorporated by reference in this document with respect to PPG, Splitco or their respective subsidiaries, or the PPG Chlor-alkali and Derivatives Business, and with respect to the terms and conditions of the exchange offer has been provided by PPG. This document contains or incorporates by reference references to trademarks, trade names and service marks, including tri-ethane®, VersaTrans® and Accu-Tab®, that are owned by PPG and its related entities. Transitions® is a registered trademark of Transitions Optical, Inc.

This prospectus is not an offer to sell or exchange and it is not a solicitation of an offer to buy any shares of PPG common stock, Splitco common stock or Georgia Gulf common stock in any jurisdiction in which the offer, sale or exchange is not permitted. Non-U.S. shareholders should consult their advisors in considering whether they may participate in the exchange offer in accordance with the laws of their home countries and, if they do participate, whether there are any restrictions or limitations on transactions in the shares of Splitco common stock that may apply in their home countries. PPG, Splitco and Georgia Gulf cannot provide any assurance about whether such limitations may exist. See “This Exchange Offer—Certain Matters Relating to Non-U.S. Jurisdictions” for additional information about limitations on the exchange offer outside the United States.

 

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HELPFUL INFORMATION

In this document:

 

   

“Additional Agreements” means the Employee Matters Agreement, the Tax Matters Agreement, the Shared Facilities, Services and Supply Agreement, the Transition Services Agreement, the Servitude Agreement, the Electric Generation, Distribution and Transmission Facilities Lease, and the Chlorine, Liquid Caustic Soda and Hydrochloric Acid Sales Agreements;

 

   

“ASC” means the Financial Accounting Standards Board Accounting Standards Codification;

 

   

“Chlorine, Liquid Caustic Soda and Hydrochloric Acid Sales Agreements” means those certain agreements to be entered into at the date of the Separation between PPG and Georgia Gulf;

 

   

“Chlorine Sales Agreement Amendment” means the Amendment, dated as of July 18, 2012, to the Chlorine Sales Contract, dated as of January 1, 1985, as amended, between PPG and a subsidiary of Georgia Gulf;

 

   

“Code” means the Internal Revenue Code of 1986, as amended;

 

   

“Debt Exchange” means the transfer of the Debt Securities by PPG on or about the closing date of the Merger to investment banks and/or commercial banks in satisfaction of the debt obligations of PPG described in the section of this document entitled “Debt Financing—PPG Bridge Facility”;

 

   

“Debt Securities” means the $675.0 million in senior notes, subject to increase or decrease by PPG, as described in the section of this document entitled “Debt Financing—PPG Bridge Facility,” that Splitco will issue to PPG, that PPG thereafter expects to exchange for debt obligations of PPG in the Debt Exchange, and that will be the debt obligations of Splitco, guaranteed by Georgia Gulf and certain of its subsidiaries, following consummation of the Transactions;

 

   

“Distribution” means the distribution by PPG of its shares of Splitco common stock to the holders of shares of PPG common stock by way of an exchange offer and, with respect to any shares of Splitco common stock that are not subscribed for in the exchange offer, a pro rata distribution to the holders of shares of PPG common stock;

 

   

“Distribution Tax Opinion” means an opinion from Wachtell, Lipton, Rosen & Katz, tax counsel to PPG, substantially to the effect that (i) the Distribution will be treated as satisfying the business purpose requirement described in Treasury Regulation § 1.355-2(b)(1), (ii) the Distribution will not be treated as being used principally as a device for the distribution of earnings and profits of PPG or Splitco or both under Section 355(a)(1)(B) of the Code, (iii) the stock of Splitco distributed in the Distribution will not be treated as other “qualified property” by reason of the application of Section 355(e)(1) of the Code; and (iv) the Splitco securities will constitute “securities” for purposes of the application of Section 361(a) of the Code;

 

   

“The Electric Generation, Distribution and Transmission Facilities Lease” means the Generation, Distribution and Transmission Facilities Lease to be entered into at the date of the Separation, between PPG and Splitco;

 

   

“Employee Matters Agreement” means the Employee Matters Agreement, dated as of July 18, 2012, by and among Georgia Gulf, PPG and Splitco;

 

   

“Exchange Act” means the Securities Exchange Act of 1934, as amended;

 

   

“Exchange Loans” means the unsecured loans to be issued by Splitco at the closing of the Merger if certain conditions are satisfied and the debt obligations of PPG described in the section of this document entitled “Debt Financing—PPG Bridge Facility” have not been repaid in full prior to the closing of the Merger;

 

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“Exchange Notes” means unsecured senior exchange notes of Splitco (1) for which the Exchange Loans (if any) may be exchanged in whole or in part at any time after the first anniversary of the date the Exchange Loans (if any) are first exchanged for the debt obligations of PPG described in the section of this document entitled “Debt Financing—PPG Bridge Facility” or (2) which may be issued at the closing of the Merger upon the demand of certain financial institutions if certain conditions are satisfied and the debt obligations of PPG described in the section of this document entitled “Debt Financing—PPG Bridge Facility” have not been repaid in full prior to the closing of the Merger;

 

   

“GAAP” means generally accepted accounting principles in the United States;

 

   

“Georgia Gulf” means Georgia Gulf Corporation, a Delaware corporation, and, unless the context otherwise requires, its subsidiaries;

 

   

“Georgia Gulf common stock” means the common stock, par value $0.01 per share, of Georgia Gulf;

 

   

“Georgia Gulf Group” means Georgia Gulf and each of its consolidated subsidiaries including, after consummation of the Merger, Splitco;

 

   

“Group” means the Georgia Gulf Group, PPG Group, or Splitco Group, as the case may be.

 

   

“Master Terminal Agreement” means the Master Terminal Agreement to be entered into at the date of the Separation between PPG and Splitco;

 

   

“Merger” means the combination of Georgia Gulf’s business and the PPG Chlor-alkali and Derivatives Business through the merger of Merger Sub with and into Splitco, whereby the separate corporate existence of Merger Sub will cease and Splitco will continue as the surviving company and as a wholly-owned subsidiary of Georgia Gulf, as contemplated by the Merger Agreement;

 

   

“Merger Agreement” means the Agreement and Plan of Merger, dated as of July 18, 2012, by and among PPG, Splitco, Georgia Gulf and Merger Sub, as amended by Amendment No. 1 to the Merger Agreement, dated as of August 31, 2012 (for the avoidance of doubt, references to the Merger Agreement made with respect to the opinions of Georgia Gulf’s financial advisors exclude Amendment No. 1);

 

   

“Merger Sub” means Grizzly Acquisition Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Georgia Gulf, and, unless the context otherwise requires, its subsidiaries;

 

   

“Monroeville Shared Facilities Agreement” means the Monroeville Shared Facilities Agreement to be entered into at the date of the Separation between PPG and Splitco;

 

   

“NYSE” means the New York Stock Exchange;

 

   

“PPG” means PPG Industries, Inc., a Pennsylvania corporation, and, unless the context otherwise requires, its subsidiaries, other than Splitco and any of its subsidiaries;

 

   

“PPG Chlor-alkali and Derivatives Business” means substantially all of the assets and liabilities of the business of PPG relating to the production of chlorine, caustic soda and related chemicals as further described in the section of this document entitled “Information on the PPG Chlor-alkali and Derivatives Business” and to be transferred to Splitco pursuant to the terms and conditions contained in the Separation Agreement;

 

   

“PPG common stock” means the common stock, par value $1.66 2/3 per share, of PPG;

 

   

“PPG Group” means PPG and each of its consolidated subsidiaries which, after consummation of the Merger, will not include the PPG Chlor-alkali and Derivatives Business;

 

   

“PPG shareholders” means the holders of PPG common stock;

 

   

“SEC” means the United States Securities and Exchange Commission;

 

   

“Securities Act” means the Securities Act of 1933, as amended;

 

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“Separation” means the transfer by PPG of the assets and liabilities related to the PPG Chlor-alkali and Derivatives Business, including certain subsidiaries of PPG, to Splitco;

 

   

“Separation Agreement” means the Separation Agreement, dated as of July 18, 2012, between PPG and Splitco;

 

   

“Servitude Agreement” means the Servitude Agreement to be entered into at the date of the Separation between PPG and Splitco;

 

   

“Shared Facilities, Services and Supply Agreement” means the Shared Facilities, Services and Supply Agreement to be entered into at the date of the Separation between PPG and Splitco;

 

   

“Special Distribution” means the distribution to be made in connection with the Transactions by Splitco to PPG consisting of (1) approximately $225.0 million in cash, subject to increase or decrease by PPG, as described in the section of this document entitled “Debt Financing—PPG Bridge Facility,” and (2) the Debt Securities in an amount that would satisfy the debt obligations of PPG described in the section of this document entitled “Debt Financing—PPG Bridge Facility”;

 

   

“Splitco” means Eagle Spinco, Inc., a Delaware corporation, and, prior to the Merger, a wholly-owned subsidiary of PPG, and, unless the context otherwise requires, its subsidiaries;

 

   

“Splitco Group” means Splitco and each of its consolidated subsidiaries (including, after consummation of the Merger, Georgia Gulf and each of its subsidiaries);

 

   

“Tax Matters Agreement” means the Tax Matters Agreement to be entered into at the date of the Separation by and among Georgia Gulf, PPG and Splitco;

 

   

“TCI” means Taiwan Chlorine Industries, Ltd., a joint venture between PPG and China Petrochemical Development Corporation. For more information about the transfer of PPG’s interest in TCI to Splitco, see “The Merger Agreement—Financing”;

 

   

“TCI Interests” means the shares of TCI owned by PPG as of the date of the Merger Agreement, which represent a 60 percent interest in TCI;

 

   

“Term Facility” means $225.0 million in new bank debt, subject to increase or decrease by PPG, as described in the section of this document entitled “Debt Financing—PPG Bridge Facility,” to be incurred by Splitco under a senior secured term loan facility, which debt will be obligations of Splitco and, upon consummation of the Transactions, guaranteed by Georgia Gulf and certain of its subsidiaries;

 

   

“Transactions” means the transactions contemplated by the Merger Agreement and the Separation Agreement, which provide for, among other things, the Separation, the Term Facility, the Debt Securities, the Debt Exchange, the Distribution and the Merger, as described in the section of this document entitled “The Transactions”;

 

   

“Transition Services Agreement” means the Transition Services Agreement to be entered into at the date of the Separation between PPG and Splitco; and

 

   

“VWAP” means volume-weighted average price.

 

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QUESTIONS AND ANSWERS ABOUT THIS EXCHANGE OFFER AND THE TRANSACTIONS

Questions and Answers About This Exchange Offer

The following are some of the questions that PPG shareholders may have, and answers to those questions. These questions and answers, as well as the following summary, are not meant to be a substitute for the information contained in the remainder of this document, and this information is qualified in its entirety by the more detailed descriptions and explanations contained elsewhere in this document. You are urged to read this document in its entirety prior to making any decision.

 

Q: Who may participate in this Exchange Offer?

 

A: Any U.S. holders of PPG common stock during the exchange offer period may participate in this exchange offer. Although PPG has mailed this prospectus to its shareholders to the extent required by U.S. law, including shareholders located outside the United States, this prospectus is not an offer to buy, sell or exchange and it is not a solicitation of an offer to buy or sell any shares of PPG common stock, shares of Georgia Gulf common stock or shares of Splitco common stock in any jurisdiction in which such offer, sale or exchange is not permitted.

Countries outside the United States generally have their own legal requirements that govern securities offerings made to persons resident in those countries and often impose stringent requirements about the form and content of offers made to the general public. None of PPG, Georgia Gulf or Splitco has taken any action under non-U.S. regulations to facilitate a public offer to exchange the shares of PPG common stock, Georgia Gulf common stock or Splitco common stock outside the United States. Accordingly, the ability of any non-U.S. person to tender shares of PPG common stock in the exchange offer will depend on whether there is an exemption available under the laws of such person’s home country that would permit the person to participate in the exchange offer without the need for PPG, Georgia Gulf or Splitco to take any action to facilitate a public offering in that country or otherwise. For example, some countries exempt transactions from the rules governing public offerings if they involve persons who meet certain eligibility requirements relating to their status as sophisticated or professional investors.

Non-U.S. shareholders should consult their advisors in considering whether they may participate in the exchange offer in accordance with the laws of their home countries and, if they do participate, whether there are any restrictions or limitations on transactions in the shares of PPG common stock, Splitco common stock or Georgia Gulf common stock that may apply in their home countries. None of PPG, Georgia Gulf or Splitco can provide any assurance about whether such limitations may exist. See “This Exchange Offer—Certain Matters Relating to Non-U.S. Jurisdictions” for additional information about limitations on the exchange offer outside the United States.

 

Q: How many shares of Splitco common stock will I receive for each share of PPG common stock that I tender?

 

A: This exchange offer is designed to permit you to exchange your shares of PPG common stock for shares of Splitco common stock at a 10% discount to the per-share value of Georgia Gulf common stock, calculated as set forth in this document. Stated another way, for each $1.00 of your PPG common stock accepted in this exchange offer, you will receive approximately $1.11 of Splitco common stock. The value of the PPG common stock will be based on the calculated per-share value for the PPG common stock on the NYSE and the value of the Splitco common stock will be based on the calculated per-share value for Georgia Gulf common stock on the NYSE, in each case determined by reference to the simple arithmetic average of the daily VWAP on each of the Valuation Dates. Please note, however, that:

 

   

The number of shares you can receive is subject to an upper limit of an aggregate of 3.9745 shares of Splitco common stock for each share of PPG common stock accepted in this exchange offer. The next question and answer below describes how this limit may impact the value you receive.

 

   

This exchange offer does not provide for a minimum exchange ratio. See “This Exchange Offer—Terms of this Exchange Offer.”

 

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Because this exchange offer is subject to proration, PPG may accept for exchange only a portion of the PPG common stock tendered by you.

 

Q: Is there a limit on the number of shares of Splitco common stock I can receive for each share of PPG common stock that I tender?

 

A: The number of shares you can receive is subject to an upper limit of 3.9745 shares of Splitco common stock for each share of PPG common stock accepted in this exchange offer. If the upper limit is in effect, you will receive less than $1.11 of Splitco common stock for each $1.00 of PPG common stock that you tender, and you could receive much less. For example, if the calculated per-share value of PPG common stock was $135.24 (the highest closing price for PPG common stock on the NYSE during the three-month period prior to commencement of this exchange offer) and the calculated per-share value of Splitco common stock was $35.39 (the lowest closing price for Georgia Gulf common stock on the NYSE during that three-month period), the value of Splitco common stock, based on the Georgia Gulf common stock price, received for PPG common stock accepted for exchange would be approximately $1.04 for each $1.00 of PPG common stock accepted for exchange.

The upper limit represents a 20% discount for Splitco common stock based on the average of the daily VWAPs of PPG common stock and Georgia Gulf common stock on the NYSE on December 21, 2012, December 24, 2012 and December 26, 2012 (the last three trading days before the commencement of this exchange offer). PPG set this upper limit to ensure that an unusual or unexpected drop in the trading price of Georgia Gulf common stock, relative to the trading price of PPG common stock, would not result in an unduly high number of shares of Splitco common stock being exchanged for each share of PPG common stock accepted in this exchange offer.

 

Q: What will happen if the upper limit is in effect?

 

A: PPG will announce whether the upper limit on the number of shares that can be received for each share of PPG common stock tendered will be in effect at the expiration of the exchange offer period, through http://www.edocumentview.com/PPGINDUSTRIES and by press release, no later than 4:30 p.m., New York City time, on the last trading day prior to the expiration date. If the upper limit is in effect at that time, then the exchange ratio will be fixed at the upper limit and a Mandatory Extension of this exchange offer will be made until 8:00 a.m., New York City time, on the day after the second trading day following the last trading day prior to the originally contemplated expiration date to permit shareholders to tender or withdraw their PPG common stock during those days. The daily VWAP and trading prices of PPG common stock and Georgia Gulf common stock during this Mandatory Extension will not, however, affect the upper limit, which will be fixed at 3.9745. See “This Exchange Offer—Terms of this Exchange Offer—Extension; Termination; Amendment—Mandatory Extension.”

 

Q: How are the calculated per–share values of PPG common stock and Georgia Gulf common stock determined for purposes of calculating the number of shares of Splitco common stock to be received in this exchange offer?

 

A: The calculated per–share value of PPG common stock and Georgia Gulf common stock for purposes of this exchange offer will equal the simple arithmetic average of the daily VWAP of PPG common stock and Georgia Gulf common stock, as the case may be, on the NYSE on each of the Valuation Dates. PPG will determine such calculations of the per–share values of PPG common stock and Georgia Gulf common stock and such determination will be final.

 

Q: What is the “daily volume–weighted average price” or “daily VWAP?”

 

A:

The “daily volume–weighted average price” for PPG common stock and Georgia Gulf common stock will be the volume-weighted average price of PPG common stock and Georgia Gulf common stock on the NYSE during the period beginning at 9:30 a.m., New York City time (or such other time as is the official open of trading on the NYSE), and ending at 4:00 p.m., New York City time (or such other time as is the official close of trading on the NYSE and in no event later than 4:10 p.m., New York City time), as reported to PPG

 

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  by Bloomberg L.P. for the equity ticker pages PPG, in the case of PPG common stock, and GGC, in the case of Georgia Gulf common stock. The daily VWAPs provided by Bloomberg L.P. may be different from other sources of volume–weighted average prices or investors’ or security holders’ own calculations of volume–weighted average prices.

 

Q: Where can I find the daily VWAP of PPG common stock and Georgia Gulf common stock during the exchange offer period?

 

A: PPG will maintain a website at http://www.edocumentview.com/PPGINDUSTRIES that provides the daily VWAP of both PPG common stock and Georgia Gulf common stock, together with indicative exchange ratios, for each day during this exchange offer. During the period of the Valuation Dates, when the values of PPG common stock and Georgia Gulf common stock are calculated for the purposes of this exchange offer, the website will show the indicative exchange ratios based on indicative calculated per–share values calculated by PPG, which will equal (i) on the first Valuation Date, the intra–day VWAP during the elapsed portion of that day, (ii) on the second Valuation Date, the intra–day VWAP during the elapsed portion of that day averaged with the actual daily VWAP on the first Valuation Date and (iii) on the third Valuation Date, the intra–day VWAP during the elapsed portion of that day averaged with the actual daily VWAP on the first Valuation Date and with the actual daily VWAP on the second Valuation Date. During this period, the indicative exchange ratios and calculated per-share values will be updated at 10:30 a.m., 1:30 p.m. and no later than 4:30 p.m., New York City time.

 

Q: Why is the calculated per–share value for Splitco common stock based on the trading prices for Georgia Gulf common stock?

 

A: There is currently no trading market for Splitco common stock and no such trading market will be established in the future. PPG believes, however, that the trading prices for Georgia Gulf common stock are an appropriate proxy for the trading prices of Splitco common stock because (i) in the Merger each share of Splitco common stock will be converted into the right to receive a number of shares of Georgia Gulf common stock equal to (a) the greater of (i) 35,200,000 shares of Georgia Gulf common stock or (ii) the product of (x) the number of shares of Georgia Gulf common stock issued and outstanding immediately prior to the effective time of the Merger multiplied by (y) 1.02020202, divided by (b) the number of shares of Splitco common stock issued and outstanding immediately prior to the effective time of the Merger (subject to adjustment in certain circumstances), (ii) Splitco will authorize the issuance of a number of shares of Splitco common stock such that the total number of shares of Splitco common stock outstanding immediately prior to the Merger will be that number that results in the exchange ratio in the Merger equaling one and, as a result, each share of Splitco common stock (except shares of Splitco common stock held by Splitco as treasury stock) will be converted into one share of Georgia Gulf common stock in the Merger and (iii) at the Valuation Dates, it is expected that all the major conditions to the consummation of the Merger will have been satisfied and the Merger will be expected to be consummated shortly, such that investors should be expected to be valuing Georgia Gulf common stock based on the expected value of such Georgia Gulf common stock after the Merger. There can be no assurance, however, that Georgia Gulf common stock after the Merger will trade on the same basis as Georgia Gulf common stock trades prior to the Merger. See “Risk Factors—Risks Related to the Transactions—The trading prices of Georgia Gulf common stock may not be an appropriate proxy for the prices of Splitco common stock.”

 

Q: How and when will I know the final exchange ratio?

 

A: Subject to the possible Mandatory Extension of this exchange offer described below, the final exchange ratio showing the number of shares of Splitco common stock that you will receive for each share of PPG common stock accepted in this exchange offer will be available at http://www.edocumentview.com/PPGINDUSTRIES no later than 4:30 p.m., New York City time, on the last trading day prior to the expiration date and separately announced by press release. In addition, as described below, you may also contact the information agent to obtain these indicative exchange ratios and the final exchange ratio at its toll–free number provided on the back cover of this document.

 

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PPG will announce whether the upper limit on the number of shares that can be received for each share of PPG common stock tendered is in effect at http://www.edocumentview.com/PPGINDUSTRIES and separately by press release, no later than 4:30 p.m., New York City time, on the last trading day prior to the expiration date. If the upper limit is in effect at that time, then the exchange ratio will be fixed at the upper limit and a Mandatory Extension until 8:00 a.m., New York City time, on the day after the second trading day following the last trading day prior to the originally contemplated expiration date will be made to permit shareholders to tender or withdraw their PPG common stock during those days.

 

Q: Will indicative exchange ratios be provided during the tender offer period?

 

A: Yes. Indicative exchange ratios will be available by contacting the information agent at the toll-free number provided on the back cover of this prospectus on each day during the exchange offer period, calculated as though that day were the expiration date of this exchange offer. The indicative exchange ratio will also reflect whether the upper limit on the exchange ratio, described above, would have been in effect. You may also contact the information agent at its toll–free number to obtain these indicative exchange ratios.

In addition, for purposes of illustration, a table that indicates the number of shares of Splitco common stock that you would receive per share of PPG common stock, calculated on the basis described above and taking into account the upper limit, assuming a range of averages of the daily VWAP of PPG common stock and Georgia Gulf common stock on the Valuation Dates is provided under “This Exchange Offer—Terms of this Exchange Offer.”

 

Q: What if PPG common stock or Georgia Gulf common stock does not trade on any of the Valuation Dates?

 

A: If a market disruption event occurs with respect to PPG common stock or Georgia Gulf common stock on any of the Valuation Dates, the calculated per–share value of PPG common stock and Splitco common stock will be determined using the daily VWAP of shares of PPG common stock and shares of Georgia Gulf common stock on the preceding trading day or days, as the case may be, on which no market disruption event occurred with respect to both PPG common stock and Georgia Gulf common stock. If, however, a market disruption event occurs as specified above, PPG may terminate this exchange offer if, in its reasonable judgment, the market disruption event has impaired the benefits of this exchange offer. For specific information as to what would constitute a market disruption event, see “This Exchange Offer—Conditions for Consummation of this Exchange Offer.”

 

Q: Are there circumstances under which I would receive fewer shares of Splitco common stock than I would have received if the exchange ratio were determined using the closing prices of PPG common stock and Georgia Gulf common stock on the expiration date of this exchange offer?

 

A: Yes. For example, if the trading price of PPG common stock were to increase during the period of the Valuation Dates, the calculated per–share value of PPG common stock would likely be lower than the closing price of PPG common stock on the expiration date of this exchange offer. As a result, you may receive fewer shares of Splitco common stock for each $1.00 of PPG common stock than you would have if that per–share value were calculated on the basis of the closing price of PPG common stock on the expiration date. Similarly, if the trading price of Georgia Gulf common stock were to decrease during the period of the Valuation Dates, the calculated per–share value of Splitco common stock would likely be higher than the closing price of Georgia Gulf common stock on the expiration date. This could also result in your receiving fewer shares of Splitco common stock for each $1.00 of PPG common stock than you would otherwise receive if that per–share value were calculated on the basis of the closing price of Georgia Gulf common stock on the expiration date of this exchange offer. See “This Exchange Offer—Terms of this Exchange Offer.”

 

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Q: Will PPG distribute fractional shares?

 

A: Upon consummation of this exchange offer, the exchange offer agent will hold the shares of Splitco common stock in trust for the holders of PPG common stock who validly tendered their shares and, in case of a pro rata distribution, for the holders of record of PPG common stock for the pro rata distribution. Immediately following the consummation of this exchange offer and by means of the Merger, each share of Splitco common stock will be converted into the right to receive a number of shares of Georgia Gulf common stock equal to (a) the greater of (i) 35,200,000 shares of Georgia Gulf common stock or (ii) the product of (x) the number of shares of Georgia Gulf common stock issued and outstanding immediately prior to the effective time of the Merger multiplied by (y) 1.02020202, divided by (b) the number of shares of Splitco common stock issued and outstanding immediately prior to the effective time of the Merger. In the Merger, no fractional shares of Georgia Gulf common stock will be delivered to holders of Splitco common stock. All fractional shares of Georgia Gulf common stock that a holder of shares of Splitco common stock would otherwise be entitled to receive as a result of the Merger will be aggregated by the transfer agent. The transfer agent will cause the whole shares obtained thereby to be sold on behalf of such holders of shares of Splitco common stock that would otherwise be entitled to receive such fractional shares of Georgia Gulf common stock in the Merger, in the open market or otherwise as reasonably directed by PPG, and in no case later than five business days after the Merger. The transfer agent will make available the net proceeds thereof, after deducting any required withholding taxes and brokerage charges, commissions and transfer taxes, on a pro rata basis, without interest, as soon as practicable to the holders of Splitco common stock that would otherwise be entitled to receive such fractional shares of Georgia Gulf common stock in the Merger.

 

Q: What is the aggregate number of shares of Splitco common stock being offered in this exchange offer?

 

A: In this exchange offer, PPG is offering a number of shares of Splitco common stock equal to the greater of (i) 35,200,000 shares or (ii) the product of (x) the number of shares of Georgia Gulf common stock issued and outstanding immediately prior to the effective time of the Merger multiplied by (y) 1.02020202, subject to adjustment under certain circumstances. In this exchange offer, PPG is offering all the shares of Splitco common stock it holds on the date of consummation of this exchange offer.

 

Q: What happens if not enough shares of PPG common stock are tendered to allow PPG to exchange all of the shares of Splitco common stock it holds?

 

A: If this exchange offer is consummated but less than all shares of Splitco common stock owned by PPG are exchanged because this exchange offer is not fully subscribed, the additional shares of Splitco common stock owned by PPG will be distributed on a pro rata basis to the holders of shares of PPG common stock. Any PPG shareholder who validly tenders (and does not properly withdraw) shares of PPG common stock for shares of Splitco common stock in the exchange offer will waive their rights with respect to such shares to receive, and forfeit any rights to, shares of Splitco common stock distributed on a pro rata basis to PPG shareholders in the event the exchange offer is not fully subscribed.

Upon consummation of this exchange offer, PPG will deliver to the exchange offer agent a global certificate representing all of the Splitco common stock being distributed in this exchange offer, with instructions to hold the shares of Splitco common stock in trust for holders of shares of PPG common stock validly tendered and not withdrawn and holders of shares of PPG common stock as of the distribution date of a pro rata distribution, if any. If there is a pro rata distribution, the exchange offer agent will calculate the exact number of shares of Splitco common stock not exchanged in this exchange offer and to be distributed on a pro rata basis, and that number of shares of Splitco common stock will be held in trust for the holders of shares of PPG common stock. See “This Exchange Offer—Distribution of Any Shares of Splitco Common Stock Remaining After This Exchange Offer.”

 

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Q: Will all shares of PPG common stock that I tender be accepted in this exchange offer?

 

A: Not necessarily. Depending on the number of shares of PPG common stock validly tendered in this exchange offer and not properly withdrawn, and the calculated per-share values of PPG common stock and Splitco common stock determined as described above, PPG may have to limit the number of shares of PPG common stock that it accepts in this exchange offer through a proration process. Any proration of the number of shares accepted in this exchange offer will be determined on the basis of the proration mechanics described under “Summary—Terms of this Exchange Offer—Proration; Odd-Lots.”

An exception to proration can apply to shareholders (other than plan participants in the PPG Industries, Inc. Employee Savings Plan (the “PPG Employee Saving Plan”) or PPG Industries, Inc. Defined Contribution Retirement Plan (the “PPG Defined Contribution Retirement Plan)) who beneficially own “odd–lots,” that is, fewer than 100 shares of PPG common stock. Such beneficial holders of PPG common stock who validly tender all of their shares will not to be subject to proration.

In all other cases, proration for each tendering shareholder will be based on (i) the proportion that the total number of shares of PPG common stock to be accepted bears to the total number of shares of PPG common stock validly tendered and not properly withdrawn and (ii) the number of shares of PPG common stock validly tendered and not properly withdrawn by that shareholder (and not on that shareholder’s aggregate ownership of shares of PPG common stock). Any shares of PPG common stock not accepted for exchange as a result of proration will be returned to tendering shareholders promptly after the final proration factor is determined.

 

Q: Will I be able to sell my shares of Splitco common stock after this exchange offer is completed?

 

A: No. There currently is no trading market for shares of Splitco common stock and no such trading market will be established in the future.

 

Q: How many shares of PPG common stock will PPG accept if this exchange offer is completed?

 

A: The number of shares of PPG common stock that will be accepted if this exchange offer is completed will depend on the final exchange ratio, the number of shares of Splitco common stock offered and the number of shares of PPG common stock tendered; provided that PPG will only accept a number of shares of PPG common stock up to the Maximum Amount. Georgia Gulf expects to issue approximately 35,236,010 shares of Georgia Gulf common stock in the Merger, which would result in PPG offering the same number of shares of Splitco common stock in this exchange offer. Assuming PPG offers 35,236,010 shares of Splitco common stock in this exchange offer, the largest possible number of shares of PPG common stock that will be accepted, subject to the Maximum Amount, would equal 35,236,010 divided by the final exchange ratio. For example, assuming that the final exchange ratio is 3.5329 (the current indicative exchange ratio based on the daily VWAPs of PPG common stock and Georgia Gulf common stock on December 21, 2012, December 24, 2012 and December 26, 2012), then PPG would accept up to a total of approximately 9,973,679 shares of PPG common stock.

 

Q: Are there any conditions to PPG’s obligation to complete this exchange offer?

 

A: Yes. This exchange offer is subject to various conditions listed under “This Exchange Offer—Conditions for Consummation of this Exchange Offer.” If any of these conditions are not satisfied or waived prior to the expiration of this exchange offer, PPG will not be required to accept shares for exchange and may extend or terminate this exchange offer.

PPG may waive any of the conditions to this exchange offer. For a description of the material conditions precedent to this exchange offer, including satisfaction or waiver of the conditions to the Transactions, the receipt of Georgia Gulf stockholder approval of the issuance of shares of Georgia Gulf common stock in connection with Merger and other conditions, see “This Exchange Offer—Conditions for Consummation of this Exchange Offer.” Georgia Gulf has no right to waive any of the conditions to this exchange offer.

 

Q: When does this exchange offer expire?

 

A: The period during which you are permitted to tender your shares of PPG common stock in this exchange offer will expire at 8:00 a.m., New York City time, on January 28, 2013, unless PPG extends this exchange offer. See “This Exchange Offer—Terms of this Exchange Offer—Extension; Termination; Amendment.”

 

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Q: Can this exchange offer be extended and under what circumstances?

 

A: Yes. PPG can extend this exchange offer, in its sole discretion, at any time and from time to time. For instance, this exchange offer may be extended if any of the conditions for consummation of this exchange offer listed under “This Exchange Offer—Conditions for Consummation of this Exchange Offer” are not satisfied or waived prior to the expiration of this exchange offer. In case of an extension of this exchange offer, PPG will publicly announce the extension at http://www.edocumentview.com/PPGINDUSTRIES and separately by press release no later than 9:00 a.m., New York City time, on the next business day following the previously scheduled expiration date. In addition, if the upper limit on the number of shares that can be received for each share of PPG common stock tendered is in effect at the expiration of the exchange offer period, then the exchange ratio will be fixed at the upper limit and a Mandatory Extension of this exchange offer will be made until 8:00 a.m., New York City time, on the second following trading day.

 

Q: How do I participate in this exchange offer?

 

A: The procedures you must follow to participate in this exchange offer will depend on whether you hold your shares of PPG common stock in certificated form, through a bank or trust company or broker, as a participant in the PPG Employee Savings Plan or PPG Defined Contribution Retirement Plan, or if your PPG common shares are held in book-entry via the Direct Registration System (“DRS”). For specific instructions about how to participate, see “This Exchange Offer—Terms of This Exchange Offer—Procedures for Tendering.”

 

Q: What if I participate in the PPG Employee Savings Plan or PPG Defined Contribution Retirement Plan?

 

A: If shares of PPG common stock are held in your account under the PPG Employee Savings Plan or PPG Defined Contribution Retirement Plan, you can elect to either keep your shares of PPG common stock or exchange some or all of your shares of PPG common stock for shares of Georgia Gulf common stock. The deadline for making this election is three business days prior to the last day of the exchange offer period. You will receive instructions from the plan record keeper via letter or email informing you how to make an election. If you do not make an active election at least three business days prior to the last day of the exchange offer period, none of the shares of PPG common stock in your account will be exchanged for shares of Georgia Gulf common stock and your holdings of shares of PPG common stock in your PPG Employee Savings Plan and PPG Defined Contribution Retirement Plan will remain unchanged. For specific instructions about how to tender your shares of PPG common stock if you participate in the PPG Employee Savings Plan and/or the PPG Detailed Contribution Retirement Plan, see “This Exchange Offer—Terms of This Exchange Offer—Procedures for Tendering.”

 

Q: How do I tender my shares of PPG common stock after the final exchange ratio has been determined?

 

A: If you wish to tender your shares after the final exchange ratio has been determined, you will generally need to do so by means of delivering a notice of guaranteed delivery and complying with the guaranteed delivery procedures described in the section entitled “This Exchange Offer—Terms of this Exchange Offer—Procedures for Tendering—Guaranteed Delivery Procedures.” If you hold shares of PPG common stock through a broker, dealer, commercial bank, trust company or similar institution, that institution must tender your shares on your behalf.

If your shares of PPG common stock are held through an institution and you wish to tender your PPG common stock after The Depository Trust Company has closed, the institution must deliver a notice of guaranteed delivery to the exchange offer agent via facsimile prior to 8:00 a.m., New York City time, on the expiration date.

 

Q: Can I tender only a portion of my shares of PPG common stock in this exchange offer?

 

A: Yes. You may tender all, some or none of your shares of PPG common stock.

 

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Q: What do I do if I want to retain all of my shares of PPG common stock?

 

A: If you want to retain all of your shares of PPG common stock, you do not need to take any action. However, after the Transactions, the PPG Chlor-alkali and Derivatives Business will no longer be owned by PPG, and as a holder of PPG common stock you will no longer hold shares in a company that owns the PPG Chlor-alkali and Derivatives Business (unless the exchange offer is consummated but is not fully subscribed and the remaining shares of Splitco common stock are distributed on a pro rata basis to PPG shareholders whose shares of PPG common stock remain outstanding after consummation of the exchange offer).

 

Q: Can I change my mind after I tender my shares of PPG common stock?

 

A: Yes. You may withdraw your tendered shares at any time before this exchange offer expires. See “This Exchange Offer—Terms of this Exchange Offer—Withdrawal Rights.” If you change your mind again, you can re-tender your shares of PPG common stock by following the tender procedures again prior to the expiration of this exchange offer.

 

Q: Will I be able to withdraw the shares of PPG common stock I tender after the final exchange ratio has been determined?

 

A: Yes. The final exchange ratio used to determine the number of shares of Splitco common stock that you will receive for each share of PPG common stock accepted in this exchange offer will be announced no later than 4:30 p.m., New York City time, on the last trading day prior to expiration date of this exchange offer, which is January 25, 2013, unless this exchange offer is extended or terminated. You have the right to withdraw shares of PPG common stock you have tendered at any time before 8:00 a.m., New York City time, on the expiration date, which is January 28, 2013. See “This Exchange Offer—Terms of this Exchange Offer.”

If the upper limit on the number of shares of Splitco common stock that can be received for each share of PPG common stock tendered is in effect at the expiration of the exchange offer period, then the exchange ratio will be fixed at the upper limit and a Mandatory Extension of this exchange offer until 8:00 a.m., New York City time, on the day after the second trading day following the last trading day prior to the originally contemplated expiration date will be made to permit you to tender or withdraw your PPG common stock during those days, either directly or by acting through a broker, dealer, commercial bank, trust company or similar institution on your behalf.

 

Q: How do I withdraw my tendered PPG common stock after the final exchange ratio has been determined?

 

A: If you are a registered shareholder of PPG common stock (which includes persons holding certificated shares and book-entry shares held through DRS) and you wish to withdraw your shares after the final exchange ratio has been determined, then you must deliver a written notice of withdrawal or a facsimile transmission notice of withdrawal to the exchange offer agent prior to 8:00 a.m., New York City time, on the expiration date. The information that must be included in that notice is specified under “This Exchange Offer—Terms of this Exchange Offer—Withdrawal Rights.”

If you hold your shares through a broker, dealer, commercial bank, trust company or similar institution, you should consult that institution on the procedures you must comply with and the time by which such procedures must be completed in order for that institution to provide a written notice of withdrawal or facsimile notice of withdrawal to the exchange offer agent on your behalf before 12:00 midnight, New York City time, on the expiration date. If you hold your shares through such an institution, that institution must deliver the notice of withdrawal with respect to any shares you wish to withdraw. In such a case, as a beneficial owner and not a registered shareholder, you will not be able to provide a notice of withdrawal for such shares directly to the exchange offer agent.

If your shares of PPG common stock are held through an institution and you wish to withdraw shares of PPG common stock after The Depository Trust Company has closed, the institution must deliver a written notice of withdrawal to the exchange offer agent prior to 8:00 a.m., New York City time, on the expiration

 

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date, in the form of The Depository Trust Company’s notice of withdrawal and you must specify the name and number of the account at The Depository Trust Company to be credited with the withdrawn shares and must otherwise comply with The Depository Trust Company’s procedures. See “This Exchange Offer—Terms of this Exchange Offer—Withdrawal Rights—Withdrawing Your Shares After the Final Exchange Ratio Has Been Determined.”

 

Q: Will I be subject to U.S. federal income tax on the shares of Splitco common stock that I receive in this exchange offer or on the shares of Georgia Gulf common stock that I receive in the Merger?

 

A: Shareholders of PPG generally will not recognize any gain or loss for U.S. federal income tax purposes as a result of this exchange offer or the Merger, except for any gain or loss attributable to the receipt of cash in lieu of fractional shares of Georgia Gulf common stock received in the Merger.

The material U.S. federal income tax consequences of the exchange offer and the Merger are described in more detail under “This Exchange Offer—Material U.S. Federal Income Tax Consequences of the Distribution and the Merger.”

 

Q: Are there any material differences between the rights of holders of PPG common stock and Georgia Gulf common stock?

 

A: Yes. PPG is a Pennsylvania corporation and Georgia Gulf is a Delaware corporation, and each is subject to different organizational documents. Holders of PPG common stock, whose rights are currently governed by PPG’s organizational documents and Pennsylvania law, will, with respect to the shares validly tendered and exchanged immediately following this exchange offer, become shareholders of Georgia Gulf and their rights will be governed by Georgia Gulf’s organizational documents and Delaware law. The material differences between the rights associated with PPG common stock and Georgia Gulf common stock that may affect PPG shareholders whose shares are accepted for exchange in this exchange offer and who will obtain shares of Georgia Gulf common stock in the Merger, relate to, among other things, classification of the board of directors, removal of directors, advance notice procedures for shareholder proposals or director nominations, procedures for amending organizational documents and approval of certain business combinations. For a further discussion of the material differences between the rights of holders of PPG common stock and Georgia Gulf common stock, see the section entitled “Comparison of Rights of Holders of PPG Common Stock and Georgia Gulf Common Stock.”

 

Q: Are there any appraisal rights for holders of shares of PPG common stock?

 

A: There are no appraisal rights available to holders of shares of PPG common stock in connection with this exchange offer.

 

Q: What will PPG do with the shares of PPG common stock that are tendered, and what is the impact of the exchange offer on PPG’s share count?

 

A: The shares of PPG common stock that are tendered in the exchange offer will be held as treasury stock by PPG. Any shares of PPG common stock acquired by PPG in the exchange offer will reduce the total number of shares of PPG common stock outstanding, although PPG’s actual number of shares outstanding on a given date reflects a variety of factors such as option exercises.

 

Q: Whom do I contact for information regarding this exchange offer?

 

A: You may call the information agent, Georgeson Inc., at (212) 440-9800 (for banks and brokers) and (888) 624-2255 (for all other callers), to ask any questions about this exchange offer or to request additional documents, including copies of this document and the letter of transmittal (including the instructions thereto).

Questions and Answers About the Transactions

 

Q: What are the key steps of the Transactions?

 

A: Below is a summary of the key steps of the Transactions. A step-by-step description of material events relating to the Transactions is set forth under “The Transactions.”

 

   

PPG will transfer to Splitco the PPG Chlor-alkali and Derivatives Business.

 

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Prior to the Distribution, Splitco will incur new indebtedness in the form of the Term Facility in the amount of approximately $225.0 million and issue approximately $675.0 million in aggregate principal amount of Debt Securities to PPG. PPG will ultimately receive the cash proceeds from the approximately $225.0 million term loan under the Term Facility through a distribution in connection with the Separation and prior to the consummation of the Merger. PPG is then expected to transfer the Debt Securities on or about the closing date of the Merger to investment banks and/or commercial banks in satisfaction of the debt obligations of PPG described in the section of this document entitled “Debt Financing—PPG Bridge Facility.” The Debt Securities are subsequently expected to be sold by the investment banks and/or commercial banks to third-party investors as described below. PPG is expected to receive approximately $900.0 million in cash from the Term Facility and Debt Securities.

 

   

PPG will offer to PPG shareholders the right to exchange all or a portion of their shares of PPG common stock for shares of Splitco common stock at a discount to the per-share value of Georgia Gulf common stock in an exchange offer. If the exchange offer is consummated but is not fully subscribed, PPG will distribute the remaining shares of Splitco common stock on a pro rata basis to PPG shareholders whose shares of PPG common stock remain outstanding after consummation of the exchange offer. Any PPG shareholder who validly tenders (and does not properly withdraw) shares of PPG common stock for shares of Splitco common stock in the exchange offer will waive their rights with respect to such shares to receive, and forfeit any rights to, shares of Splitco common stock distributed on a pro rata basis to PPG shareholders in the event the exchange offer is not fully subscribed. If there is a pro rata distribution, the exchange agent will calculate the exact number of shares of Splitco common stock not exchanged in the exchange offer and to be distributed on a pro rata basis, and the number of shares of Georgia Gulf common stock into which the remaining shares of Splitco common stock will be converted in the Merger will be transferred to PPG shareholders (after giving effect to the consummation of the exchange offer) as promptly as practicable thereafter.

 

   

Immediately after the Distribution, and on the closing date of the Merger, Merger Sub will merge with and into Splitco, whereby the separate corporate existence of Merger Sub will cease and Splitco will continue as the surviving company and a wholly-owned subsidiary of Georgia Gulf. In the Merger, each share of Splitco common stock will be converted into the right to receive Georgia Gulf common stock based on the exchange ratio set forth in the Merger Agreement, as described in the section of this document entitled “The Merger Agreement—Merger Consideration.” Following the consummation of the Merger, Georgia Gulf and certain of its subsidiaries will guarantee the Term Facility and the Debt Securities.

 

   

Immediately after consummation of the Merger, 50.5% of Georgia Gulf common stock is expected to be held by pre-Merger holders of Splitco common stock and 49.5% of Georgia Gulf common stock is expected to be held by pre-Merger Georgia Gulf stockholders, subject to potential adjustment under limited circumstances as described in the section of this document entitled “The Merger Agreement—Merger Consideration.”

 

   

As described in the second bullet point above, Georgia Gulf and PPG expect the Debt Securities to be transferred by PPG on or about the closing date of the Merger to investment banks and/or commercial banks in the Debt Exchange in exchange for debt obligations of PPG described in the section of this document entitled “Debt Financing—PPG Bridge Facility.” The Debt Securities will then be sold by the investment banks and/or commercial banks to third-party investors pursuant to an exemption from registration under the Securities Act in either a private placement or a “Rule 144A” transaction.

 

Q: What are the material U.S. federal income tax consequences to Georgia Gulf and Georgia Gulf’s stockholders resulting from the Transactions?

 

A: Georgia Gulf will not recognize any gain or loss for U.S. federal income tax purposes as a result of the Merger. Because Georgia Gulf stockholders will not participate in the Distribution or the Merger, Georgia Gulf stockholders will generally not recognize gain or loss upon either the Distribution (including this exchange offer) or the Merger.

 

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Q: What will Georgia Gulf stockholders receive in the Merger?

 

A: Georgia Gulf stockholders will not directly receive any consideration in the Merger. All shares of Georgia Gulf common stock issued and outstanding immediately before the Merger will remain issued and outstanding after consummation of the Merger. Immediately after the Merger, Georgia Gulf stockholders will continue to own shares in Georgia Gulf, which will include the PPG Chlor-alkali and Derivatives Business. Splitco, as a wholly-owned subsidiary of Georgia Gulf, will be responsible for repaying the approximately $900.0 million of debt that will be incurred in connection with the Transactions, and these debt obligations will be guaranteed by Georgia Gulf and certain of its subsidiaries after the consummation of the Merger.

 

Q: Are there possible adverse effects on the value of Georgia Gulf common stock to be received by PPG shareholders who participate in the exchange offer?

 

A: PPG shareholders that participate in the exchange offer will be exchanging their shares of PPG common stock for shares of Splitco common stock at a discount to the per-share value of Georgia Gulf common stock. The existence of a discount, along with the issuance of shares of Georgia Gulf common stock pursuant to the Merger, may negatively affect the market price of Georgia Gulf common stock. Further, Splitco will be the obligor on approximately $900.0 million of debt, consisting of approximately $225.0 million under the Term Facility and approximately $675.0 million in Debt Securities, which, after the consummation of the Merger, will be guaranteed by Georgia Gulf and certain of its subsidiaries. This additional indebtedness could adversely affect the operations and financial condition of Georgia Gulf. Georgia Gulf also expects to incur significant one-time costs in connection with the Transactions, including approximately (1) $25 to $30 million of advisory, legal, accounting and other professional fees related to the Transactions, (2) $30 to $40 million of financing related fees and (3) $55 million in transition and integration expenses, such as consulting professionals’ fees, information technology implementation costs and relocation and severance costs, that Georgia Gulf management believes are necessary to realize approximately $115.0 million of annualized cost synergies within two years from the consummation of the Transactions. The incurrence of these costs may have an adverse impact on Georgia Gulf’s liquidity or operating results in the periods in which they are incurred. Finally, Georgia Gulf’s management will be required to devote a significant amount of time and attention to the process of integrating the operations of Georgia Gulf and the PPG Chlor-alkali and Derivatives Business. If Georgia Gulf management is not able to effectively manage the process, Georgia Gulf’s business could suffer and its stock price may decline. See “Risk Factors” for a further discussion of the material risks associated with the Transactions.

 

Q: How will the Transactions impact the future liquidity and capital resources of Georgia Gulf?

 

A:

The approximately $225.0 million under the Term Facility and approximately $675.0 million in Debt Securities will be the debt obligations of Splitco, and, after consummation of the Merger, will be guaranteed by Georgia Gulf and certain of its subsidiaries. Georgia Gulf anticipates that its primary sources of liquidity for working capital and operating activities, including any future acquisitions, after the Transactions will be cash provided by operations and additional availability under its current or any future credit facilities. Georgia Gulf expects to enter into the New ABL Revolver (as defined and described in the section entitled “Debt Financing—New ABL Revolver”), which is expected to, among other things, increase Georgia Gulf’s availability to $500.0 million, subject to applicable borrowing base limitations and certain other conditions. There can be no assurance that Georgia Gulf will be able to enter into the New ABL Revolver on acceptable terms, at an appropriate time, or at all. Following the consummation of the Transactions, Georgia Gulf expects capital expenditures to be approximately $165.0 million on a pro forma basis for the year ending December 31, 2013 due to the expected increase in Georgia Gulf’s asset base. Similarly, following the consummation of the Transactions and after taking into account expected synergies, Georgia Gulf expects cash from operations to be in the range of $350.0 million to $400.0 million for the year ending December 31, 2013. Georgia Gulf believes that the combination of the operations, purchasing and logistics networks of the PPG Chlor-alkali and Derivatives Business with Georgia Gulf’s existing business will result in annualized cost synergies of

 

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  approximately $115.0 million within two years from the consummation of the Transaction as a result of (1) approximately $40 million in savings from procurement and logistics, (2) approximately $35 million in savings from operating rate optimization and (3) approximately $40 million in savings from reduced general and administrative expenses, including reduced overhead, information technology savings and the impact of purchase accounting pension adjustments. Georgia Gulf expects to incur significant, one-time costs in connection with the Transactions, including approximately (1) $25 to $30 million of advisory, legal, accounting and other professional fees related to the Transactions, (2) $30 to $40 million of financing related fees and (3) $55 million in transition and integration expenses, such as consulting professionals’ fees, information technology implementation costs and relocation and severance costs, that Georgia Gulf management believes are necessary to realize approximately $115.0 million of annualized cost synergies within two years from the consummation of the Transactions.

 

Q: How do the Transactions impact Georgia Gulf’s dividend policy?

 

A: On May 21, 2012, Georgia Gulf declared a cash dividend of $0.08 per share, Georgia Gulf’s first dividend since 2008. This dividend was paid on July 10, 2012. Georgia Gulf also declared a cash dividend of $0.08 per share on September 11, 2012, which was paid on October 10, 2012, and declared a cash dividend of $0.08 per share on December 11, 2012, which will be paid on December 28, 2012. Pursuant to the Merger Agreement, Georgia Gulf has agreed not to pay a quarterly dividend of greater than $0.08 per share until after the consummation of the Merger and indicated its intent to pay quarterly dividends from and after the closing of the Merger at no less than the current rate of $0.32 per share per annum, although the payment of cash dividends in the future will be at the discretion of Georgia Gulf’s board of directors. The declaration of any cash dividends, and the amount thereof, will depend on many factors, including Georgia Gulf’s financial condition, capital requirements, funds from operations, the dividend taxation level, Georgia Gulf’s stock price, future business prospects, and any other factors, as Georgia Gulf’s board of directors may deem relevant. Additionally, Georgia Gulf’s current asset-backed revolving credit facility (the “ABL Revolver”) and the indenture governing the 9 percent notes place significant restrictions on Georgia Gulf’s ability to pay dividends, and other indebtedness Georgia Gulf may incur in the future, including the New ABL Revolver, may contain similar restrictions.

 

Q: What will PPG receive in the Transactions?

 

A: PPG will receive the cash proceeds of the Term Facility, and will receive the Debt Securities. The Debt Securities are expected to be issued by Splitco to PPG prior to the Distribution. The Term Facility and Debt Securities will be the debt obligations of Splitco and, following the consummation of the Merger, will be guaranteed by Georgia Gulf and certain of its subsidiaries. As a result, PPG will receive total cash proceeds of approximately $900.0 million in connection with the Separation and the Distribution, subject to adjustments.

 

Q. What will you receive in the Transactions?

 

A. In the exchange offer, PPG will offer to you the right to exchange all or a portion of their shares of PPG common stock for shares of Splitco common stock at a discount to the per-share value of Georgia Gulf common stock. If the exchange offer is consummated but is not fully subscribed, PPG will distribute the remaining shares of Splitco common stock on a pro rata basis to PPG shareholders whose shares of PPG common stock remain outstanding after consummation of this exchange offer. Any PPG shareholder who validly tenders (and does not properly withdraw) shares of PPG common stock for shares of Splitco common stock in the exchange offer will waive their rights with respect to such shares to receive, and forfeit any rights to, shares of Splitco common stock distributed on a pro rata basis to PPG shareholders in the event the exchange offer is not fully subscribed. In the Merger, each share of Splitco common stock will be converted into the right to receive Georgia Gulf common stock based on the exchange ratio set forth in the Merger Agreement, as described in the section of this document entitled “The Merger Agreement—Merger Consideration.”

 

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Q: Are there any conditions to the consummation of the Transactions?

 

A: Yes. Consummation of the Transactions is subject to a number of conditions, including:

 

   

the approval of Georgia Gulf’s stockholders of the issuance of shares of Georgia Gulf common stock in the Merger;

 

   

the receipt of certain rulings from the Internal Revenue Service (the “IRS”) (which has been obtained);

 

   

the receipt by PPG of the Distribution Tax Opinion;

 

   

the completion of the various transaction steps contemplated by the Merger Agreement and the Separation Agreement, including the Separation and the Distribution;

 

   

clearance of the Merger under applicable antitrust or competition laws in Canada and the United States (which has occurred); and

 

   

other customary conditions.

If Georgia Gulf waives the satisfaction of a material condition to the consummation of the Transactions, Georgia Gulf will evaluate the appropriate facts and circumstances at that time and resolicit stockholder approval of the issuance of shares of Georgia Gulf common stock in the Merger if required to do so by law.

This document describes these conditions in more detail under “The Merger Agreement—Conditions to the Merger.”

 

Q: When will the Transactions be completed?

 

A: The Transactions are expected to be completed in early 2013. However, it is possible that the Transactions could be completed at a later time or not at all. For a discussion of the conditions to the Transactions, see “The Merger Agreement—Conditions to the Merger.”

 

Q: Are there risks associated with the Transactions?

 

A: Yes. The material risks associated with the Transactions are discussed in the section of this document entitled “Risk Factors.” Those risks include, among others, the possibility that Georgia Gulf may fail to realize the anticipated benefits of the Merger, the uncertainty that Georgia Gulf will be able to integrate the PPG Chlor-alkali and Derivatives Business successfully, the possibility that Georgia Gulf may be unable to provide benefits and services or access to equivalent financial strength and resources to the PPG Chlor-alkali and Derivatives Business that historically have been provided by PPG, the additional long-term indebtedness and liabilities that Georgia Gulf will have following the consummation of the Transactions and the substantial dilution to the ownership interest of current Georgia Gulf stockholders following the consummation of the Merger.

 

Q: What stockholder approvals are needed in connection with the Transactions?

 

A: Georgia Gulf cannot complete the Transactions unless the proposal relating to the issuance of shares of Georgia Gulf common stock in the Merger is approved by the affirmative vote of a majority of the shares of Georgia Gulf common stock represented and voting at the special meeting, either in person or by proxy (provided that the total votes cast on the proposal represent over 50% in interest of all shares entitled to vote on the proposal).

 

Q: Where will the Georgia Gulf shares to be issued in the Merger be listed?

 

A: Georgia Gulf common stock is listed on the NYSE under “GGC.” After the consummation of the Transactions, all shares of Georgia Gulf common stock issued in the Merger, and all other outstanding shares of Georgia Gulf common stock, will continue to be listed on the NYSE.

 

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SUMMARY

The following summary contains certain information described in more detail elsewhere in this document. It does not contain all the details concerning the Transactions, including information that may be important to you. To better understand the Transactions, you should carefully review this entire document and the documents it refers to. See “Where You Can Find More Information; Incorporation by Reference.”

The Companies

Georgia Gulf Corporation

Georgia Gulf Corporation

115 Perimeter Center Place, Suite 460

Atlanta, Georgia 30346

Telephone: (770) 395-4500

Georgia Gulf Corporation is a leading, integrated North American manufacturer and international marketer of chemicals and building products. Georgia Gulf manufactures two chemical lines, chlorovinyls and aromatics, as well as vinyl-based building and home improvement products. Georgia Gulf’s vinyl-based building and home improvement products, marketed under the Royal Building Products and Exterior Portfolio brands, include window and door profiles, mouldings, siding, pipe and pipe fittings and deck products. Georgia Gulf, headquartered in Atlanta, Georgia, has manufacturing facilities located throughout North America to provide industry-leading service to customers.

Grizzly Acquisition Sub, Inc.

Grizzly Acquisition Sub, Inc.

c/o Georgia Gulf Corporation

115 Perimeter Center Place, Suite 460

Atlanta, Georgia 30346

Telephone: (770) 395-4500

Grizzly Acquisition Sub, Inc., a Delaware corporation referred to in this document as Merger Sub, is a newly formed, direct wholly-owned subsidiary of Georgia Gulf that was organized specifically for the purpose of completing the Merger. Merger Sub has engaged in no business activities to date and it has no material assets or liabilities of any kind, other than those incident to its formation and in connection with the Transactions.

PPG Industries, Inc.

PPG Industries, Inc.

One PPG Place

Pittsburgh, Pennsylvania 15272

Telephone: (412) 434-3131

PPG Industries, Inc., incorporated in Pennsylvania in 1883, is a leading coatings and specialty products company. PPG’s net sales in 2011 totaled $14,885 million and 2011 net income was $1,095 million. PPG’s corporate headquarters is located in Pittsburgh, Pennsylvania. PPG has manufacturing facilities, sales offices, research and development centers and distribution centers located throughout the world. At December 31, 2011 PPG operated 128 manufacturing facilities in 45 countries.

 

 

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Eagle Spinco Inc.

Eagle Spinco Inc.

c/o PPG Industries, Inc.

One PPG Place

Pittsburgh, Pennsylvania 15272

Telephone: (412) 434-3131

Eagle Spinco Inc., a Delaware corporation referred to in this document as Splitco, is a newly formed, direct wholly-owned subsidiary of PPG that was organized specifically for the purpose of effecting the Separation. Splitco has engaged in no business activities to date and it has no material assets or liabilities of any kind, other than those incident to its formation and those incurred in connection with the Transactions.

Splitco is a holding company. In the Transactions, PPG will transfer the assets and liabilities related to the PPG Chlor-alkali and Derivatives Business, including certain subsidiaries of PPG, to Splitco or one of its subsidiaries. In exchange therefor, PPG will receive all the issued and outstanding common stock of Splitco, the cash proceeds of approximately $225.0 million from the Term Facility and the Debt Securities in an aggregate principal amount of approximately $675.0 million. The PPG Chlor-alkali and Derivatives Business produces chlor-alkali and derivative products, including chlorine, caustic soda, VCM, chlorinated solvents, calcium hypochlorite, ethylene dichloride, HCL and phosgene derivatives. For the fiscal year ended December 31, 2011, the PPG Chlor-alkali and Derivatives Business generated net sales of $1,741.0 million and net income of $233.0 million.

The Transactions

On July 19, 2012, Georgia Gulf and PPG announced that they, along with Splitco and Merger Sub, had entered into the Merger Agreement, and that PPG and Splitco had entered into the Separation Agreement, which together provide for the combination of Georgia Gulf’s business and the PPG Chlor-alkali and Derivatives Business. In the Transactions, PPG will transfer the PPG Chlor-alkali and Derivatives Business to Splitco. Prior to the Distribution, PPG will receive the cash proceeds of approximately $225.0 million from borrowings under the Term Facility through a distribution in connection with the Separation and prior to the consummation of the Merger. PPG will also receive approximately $675.0 million in Debt Securities, which are expected to be issued by Splitco to PPG prior to the Distribution, and then transferred on or about the closing date of the Merger to investment banks and/or commercial banks in satisfaction of the debt obligations of PPG described in the section of this document entitled “Debt Financing—PPG Bridge Facility.”

On the closing date of the Merger, PPG will distribute shares of Splitco common stock to its participating shareholders in an exchange offer. If the exchange offer is consummated but is not fully subscribed, PPG will distribute the remaining shares of Splitco common stock on a pro rata basis to PPG shareholders whose shares of PPG common stock remain outstanding after consummation of the exchange offer. Any PPG shareholder who validly tenders (and does not properly withdraw) shares of PPG common stock for shares of Splitco common stock in the exchange offer will waive their rights with respect to such shares to receive, and forfeit any rights to, shares of Splitco common stock distributed on a pro rata basis to PPG shareholders in the event the exchange offer is not fully subscribed. If there is a pro rata distribution, the exchange agent will calculate the exact number of shares of Splitco common stock not exchanged in the exchange offer and to be distributed on a pro rata basis, and the number of shares of Georgia Gulf common stock into which the remaining shares of Splitco common stock will be converted in the Merger will be transferred to PPG shareholders (after giving effect to the consummation of the exchange offer) as promptly as practicable thereafter. Immediately after the Distribution and on the closing date of the Merger, Merger Sub will merge with and into Splitco, whereby the separate corporate existence of Merger Sub will cease and Splitco will continue as the surviving company and a wholly-

 

 

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owned subsidiary of Georgia Gulf. In the Merger, each share of Splitco common stock will be converted into the right to receive Georgia Gulf common stock based on the exchange ratio set forth in the Merger Agreement, as described in the section of this document entitled “The Merger Agreement—Merger Consideration.”

Georgia Gulf expects to issue approximately 35,236,010 shares of Georgia Gulf common stock in the Merger, although the exact number of shares to be issued in the Merger will not be known until the closing date. Based upon the reported closing sale price of $45.65 per share for Georgia Gulf common stock on the NYSE on November 26, 2012 and the 34,538,268 shares of Georgia Gulf common stock issued and outstanding on November 26, 2012, the total value of the shares expected to be issued by Georgia Gulf and the amount of cash received by PPG in the Transactions, including the Term Facility and the Debt Securities, which will be the obligations of Splitco and, following the consummation of the Merger, will be guaranteed by Georgia Gulf, would have been approximately $2,508.5 million. The value of the consideration to be paid by Georgia Gulf in the Merger will be computed using the value of Georgia Gulf common stock on the closing date, and therefore, the actual purchase price will fluctuate with the market price of Georgia Gulf common stock until the Merger is consummated.

After the Merger, Georgia Gulf will own and operate the PPG Chlor-alkali and Derivatives Business through Splitco, which will be Georgia Gulf’s wholly-owned subsidiary, and will also continue its current businesses. All shares of Georgia Gulf common stock, including those issued in the Merger, will be listed on the NYSE under Georgia Gulf’s current trading symbol “GGC.”

Below is a step-by-step description of the sequence of material events relating to the Transactions.

Step 1    Separation

PPG will transfer to Splitco, a newly formed, direct wholly-owned subsidiary of PPG, the PPG Chlor-alkali and Derivatives Business. This transfer to Splitco will include, among the other assets and liabilities of the PPG Chlor-alkali and Derivatives Business, PPG’s (1) 50% interest in PHH Monomers, LLC (“PHH”), a joint venture with Georgia Gulf and (2) 50% interest in RS Cogen, L.L.C. (“RS Cogen”), a joint venture with an affiliate of Entergy Corporation. PPG is currently discussing with its joint venture partner, China Petrochemical Development Corporation (“CPDC”), the potential transfer of the TCI Interests to Splitco, or a subsidiary thereof. In the event that PPG does not convey the TCI Interests at or prior to the effective time of the Separation to Splitco, or a subsidiary thereof, the Special Distribution will be reduced by $130 million. Georgia Gulf does not believe that there would be a material adverse impact on the combined business after the consummation of the Merger if the TCI Interests were not to be transferred as part of the Transactions.

Step 2    Incurrence of Debt

Prior to the Distribution, Splitco will incur new indebtedness in the form of the Term Facility in the amount of approximately $225.0 million and issue approximately $675.0 million in aggregate principal amount of Debt Securities to PPG. PPG will ultimately receive the cash proceeds from the approximately $225.0 million term loan under the Term Facility through a distribution in connection with the Separation and prior to the consummation of the Merger. PPG is then expected to transfer the Debt Securities on or about the closing date of the Merger to investment banks and/or commercial banks in satisfaction of the debt obligations of PPG described in the section of this document entitled “Debt Financing—PPG Bridge Facility.” The Debt Securities are subsequently expected to be sold by the investment banks and/or commercial banks to third-party investors as described below. PPG is expected to receive approximately $900.0 million in cash from the Term Facility and Debt Securities.

 

 

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Step 3    Distribution—Exchange Offer

PPG will offer to PPG shareholders the right to exchange all or a portion of their shares of PPG common stock for shares of Splitco common stock at a discount to the per-share value of Georgia Gulf common stock in an exchange offer.

If the exchange offer is consummated but is not fully subscribed, PPG will distribute the remaining shares of Splitco common stock on a pro rata basis to PPG shareholders whose shares of PPG common stock remain outstanding after consummation of the exchange offer. Any PPG shareholder who validly tenders (and does not properly withdraw) shares of PPG common stock for shares of Splitco common stock in the exchange offer will waive their rights with respect to such shares to receive, and forfeit any rights to, shares of Splitco common stock distributed on a pro rata basis to PPG shareholders in the event the exchange offer is not fully subscribed. If there is a pro rata distribution, the exchange agent will calculate the exact number of shares of Splitco common stock not exchanged in the exchange offer and to be distributed on a pro rata basis, and the number of shares of Georgia Gulf common stock into which the remaining shares of Splitco common stock will be converted in the Merger will be transferred to PPG shareholders (after giving effect to the consummation of the exchange offer) as promptly as practicable thereafter.

The exchange agent will hold, for the account of the relevant PPG shareholders, the global certificate(s) representing all of the outstanding shares of Splitco common stock, pending the consummation of the Merger. Shares of Splitco common stock will not be able to be traded during this period.

As previously noted, Splitco has prepared this document under the assumption that the shares of Splitco will be distributed to PPG shareholders pursuant to a split-off. Based on market conditions prior to closing, PPG will determine whether the Splitco shares will be distributed to PPG’s shareholders in a spin-off or a split-off and, once a final decision is made, this document will be amended to reflect that decision, if necessary.

Step 4    Merger

Immediately after the Distribution, and on the closing date of the Merger, Merger Sub will merge with and into Splitco, whereby the separate corporate existence of Merger Sub will cease and Splitco will continue as the surviving company and as a wholly-owned subsidiary of Georgia Gulf. In the Merger, each share of Splitco common stock will be converted into the right to receive Georgia Gulf common stock based on the exchange ratio set forth in the Merger Agreement, as described in the section of this document entitled “The Merger Agreement—Merger Consideration.” Following the consummation of the Merger, Georgia Gulf and certain of its subsidiaries will guarantee the Term Facility and the Debt Securities.

Immediately after consummation of the Merger, 50.5% of Georgia Gulf common stock is expected to be held by pre-Merger holders of Splitco common stock and 49.5% of Georgia Gulf common stock is expected to be held by pre-Merger Georgia Gulf stockholders, subject to potential adjustment under limited circumstances as described in the section of this document entitled “The Merger Agreement—Merger Consideration.”

Step 5    Sale of Debt Securities to Third-Party Investors

As described in Step 2 above, Georgia Gulf and PPG expect the Debt Securities to be transferred by PPG on or about the closing date of the Merger to investment banks and/or commercial banks in the Debt Exchange in exchange for debt obligations of PPG described in the section of this document entitled “Debt Financing—PPG Bridge Facility.” The Debt Securities will then be sold by the investment banks and/or commercial banks to third-party investors pursuant to an exemption from registration under the Securities Act in either a private placement or a “Rule 144A” transaction.

 

 

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Set forth below are diagrams that graphically illustrate, in simplified form, the existing corporate structure, the corporate structure immediately following the Distribution, and the corporate structure immediately following the consummation of the Transactions contemplated by the Merger Agreement.

 

LOGO

 

LOGO

 

 

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After completion of all of the steps described above:

 

   

Georgia Gulf’s wholly-owned subsidiary, Splitco, will hold the PPG Chlor-alkali and Derivatives Business and will be the obligor under the Term Facility and the Debt Securities, which will be guaranteed by Georgia Gulf and certain of its subsidiaries; and

 

   

PPG will receive the approximately $225.0 million in cash proceeds from the Term Facility and will exchange the approximately $675.0 million in Debt Securities for debt obligations of PPG in the Debt Exchange (and the Debt Securities will then be sold to third-party investors), resulting in PPG receiving approximately $900.0 million in cash from the Transactions.

Immediately after consummation of the Merger, 50.5% of Georgia Gulf common stock is expected to be held by pre-Merger holders of Splitco common stock and 49.5% of Georgia Gulf common stock is expected to be held by pre-Merger Georgia Gulf stockholders, subject to potential adjustment under limited circumstances as described in the section of this document entitled “The Merger Agreement—Merger Consideration.” In connection with the Transactions, Georgia Gulf, Merger Sub, PPG and/or Splitco have entered into or will enter into the Additional Agreements relating to, among other things, certain tax matters, certain employee matters, the provision of certain transition services during a transition period following the consummation of the Transactions and the sharing of facilities, services and supplies. See “Other Agreements.”

Various factors were considered by Georgia Gulf and PPG in negotiating the terms of the Transactions, including the equity ownership levels of Georgia Gulf stockholders and the PPG shareholders receiving shares of Georgia Gulf common stock in the Distribution. The principal factors considered by the parties negotiating the terms of the Transactions were the strategic and financial benefits that could be expected to be achieved by combining Georgia Gulf and the PPG Chlor-alkali and Derivatives Business relative to the future prospects of Georgia Gulf on a standalone basis, the relative actual results of operations and prospects of Georgia Gulf and of the PPG Chlor-alkali and Derivatives Business, synergies expected to be realized in the combination, as well as other alternatives that may be available to Georgia Gulf, and the risks and uncertainties associated with the Transactions and with such alternatives, and the other factors identified in the sections of this document entitled “The Transactions—Background of the Transactions” and “The Transactions—Georgia Gulf’s Reasons for the Transactions.” PPG also considered, among other things, the value to PPG and PPG’s shareholders that could be realized in the Transactions as compared to the value to PPG and PPG’s shareholders that could be realized if the Transactions did not occur, the proposed tax treatment of the Transactions, and the other factors identified in the section of this document entitled “The Transactions—PPG’s Reasons for the Transactions.”

Number of Shares of Splitco Common Stock to Be Distributed to PPG Shareholders

PPG is offering to exchange all shares of Splitco common stock for shares of PPG common stock validly tendered and not properly withdrawn. Splitco will authorize the issuance of a number of shares of Splitco common stock such that the total number of shares of Splitco common stock outstanding immediately prior to the effective time of the Merger will equal the greater of (i) 35,200,000 shares or (ii) the product of (x) the number of shares of Georgia Gulf common stock issued and outstanding immediately prior to the effective time of the Merger multiplied by (y) 1.02020202, subject to adjustment in certain circumstances. Accordingly, the total number of shares of Splitco common stock outstanding immediately prior to the effective time of the Merger to be exchanged for shares of PPG common stock in the exchange offer will be equal to the number of shares of Georgia Gulf common stock to be issued in the Merger. See “The Merger Agreement—Merger Consideration.”

Terms of this Exchange Offer

PPG is offering holders of shares of PPG common stock the opportunity to exchange their shares for shares of Splitco common stock. You may tender all, some or none of your shares of PPG common stock. This

 

 

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document and related documents are being sent to persons who directly held shares of PPG common stock on December 27, 2012 and brokers, banks and similar persons whose names or the names of whose nominees appear on PPG’s shareholder list or, if applicable, who are listed as participants in a clearing agency’s security position listing for subsequent transmittal to beneficial owners of PPG’s common stock.

PPG common stock validly tendered and not properly withdrawn will be accepted for exchange at the exchange ratio determined as described under “This Exchange Offer—Terms of this Exchange Offer,” on the terms and conditions of this exchange offer and subject to the limitations described below, including the proration provisions. PPG will promptly return any shares of PPG common stock that are not accepted for exchange following the expiration of this exchange offer and the determination of the final proration factor, if any, described below.

For the purposes of illustration, the table below indicates the number of shares of Splitco common stock that you would receive per share of PPG common stock you validly tender, calculated on the basis described under “This Exchange Offer—Terms of this Exchange Offer” and taking into account the upper limit, assuming a range of averages of the daily VWAP of PPG common stock and Georgia Gulf common stock on the Valuation Dates. The first row of the table below shows the indicative calculated per–share values of PPG common stock and Splitco common stock and the indicative exchange ratio that would have been in effect following the official close of trading on the NYSE on December 26, 2012, based on the daily VWAPs of PPG common stock and Georgia Gulf common stock on December 21, 2012, December 24, 2012 and December 26, 2012. The table also shows the effects of a 10% increase or decrease in either or both the calculated per–share values of PPG common stock and Splitco common stock based on changes relative to the values as of December 26, 2012.

 

PPG common stock

 

Georgia Gulf

common stock

  Calculated
per-share
value of PPG
common stock
    Calculated
per-share
value of Splitco
common stock
    Shares of
Splitco  common
stock per PPG
common stock
tendered
    Calculated
Value  Ratio(1)
 

As of December 26, 2012

  As of December 26, 2012   $ 134.4289      $ 42.2782        3.5329 x      $ 1.11   

(1) Down 10%

  Up 10%     120.9860        46.5060        2.8906 x        1.11   

(2) Down 10%

  Unchanged     120.9860        42.2782        3.1796 x        1.11   

(3) Down 10%

  Down 10%     120.9860        38.0504        3.5329 x        1.11   

(4) Unchanged

  Up 10%     134.4289        46.5060        3.2117 x        1.11   

(5) Unchanged

  Down 10%     134.4289        38.0504        3.9255 x        1.11   

(6) Up 10%

  Up 10%     147.8718        46.5060        3.5329 x        1.11   

(7) Up 10%

  Unchanged     147.8718        42.2782        3.8862 x        1.11   

(8) Up 10%

  Down 10%(2)     147.8718        38.0504        3.9745 x        1.02   

 

(1) The Calculated Value Ratio equals (i) the calculated per-share value of Splitco common stock multiplied by the exchange ratio, divided by (ii) the calculated per-share value of PPG common stock.
(2) In this scenario, the upper limit is in effect. Absent the upper limit, the exchange ratio would have been 4.3180 shares of Splitco common stock per share of PPG common stock tendered. In this scenario, PPG would announce that the upper limit on the number of shares that can be received for each share of PPG common stock tendered is in effect at the expiration of the exchange offer period no later than 4:30 p.m., New York City time, on the last trading day prior to the expiration date, that the exchange ratio will be fixed at the upper limit and this exchange offer will be extended until 8:00 a.m., New York City time, on the day after the second trading day following the last trading day prior to the originally contemplated expiration date.

During the three–month period of September 26, 2012 through December 26, 2012, the highest closing price of PPG common stock on the NYSE was $135.24 and the lowest closing price of Georgia Gulf common stock on the NYSE was $35.39. If the calculated per–share values of PPG common stock and Splitco common stock equaled these closing

 

 

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prices, you would have received only the limit of 3.9745 shares of Splitco common stock for each share of PPG common stock tendered, and the value of such shares of Splitco common stock, based on the Georgia Gulf common stock price, would have been approximately $1.04 of Splitco common stock for each $1.00 of PPG common stock accepted for exchange.

Extension; Termination

This exchange offer, and your withdrawal rights, will expire at 8:00 a.m., New York City time, on January 28, 2013, unless this exchange offer is extended. You must tender your shares of PPG common stock prior to this time if you want to participate in this exchange offer. PPG may extend or terminate this exchange offer as described in this document.

Mandatory Extension

If the upper limit on the number of shares that can be received for each share of PPG common stock tendered is in effect at the expiration of the exchange offer period, then the exchange ratio will be fixed at the upper limit and a Mandatory Extension of this exchange offer will be made until 8:00 a.m., New York City time, on the day after the second trading day following the last trading day prior to the originally contemplated expiration date.

In case of an extension of this exchange offer (mandatory or otherwise), PPG will publicly announce the extension by press release no later than 9:00 a.m., New York City time, on the previously scheduled expiration date.

Conditions for Consummation of this Exchange Offer

PPG’s obligation to exchange shares of Splitco common stock for shares of PPG common stock is subject to the conditions listed under “This Exchange Offer—Conditions for Consummation of this Exchange Offer,” including the satisfaction of conditions to the Transactions and other conditions. These conditions include:

 

   

the absence of a market disruption event;

 

   

the approval of Georgia Gulf’s stockholders of the issuance of shares of Georgia Gulf common stock in the Merger;

 

   

the registration statements on Forms S-4 and S-1 of which this document is a part have become effective under the Securities Act;

 

   

PPG’s receipt of a private letter ruling from the Internal Revenue Service (the “IRS”) regarding the tax-free treatment of certain aspects of the Transactions (which has been obtained);

 

   

the receipt by PPG of a tax opinion from counsel to PPG;

 

   

the requirement that no one shareholder of Splitco (individually or together with all members of any “group,” as defined in the Exchange Act) after giving effect to this exchange offer and the Merger hold greater than 20% of the outstanding common stock of Georgia Gulf;

 

   

the completion of various transaction steps; and

 

   

other customary conditions.

For a description of the material conditions precedent to the Transactions, see “The Merger Agreement—Conditions to the Merger.”

PPG may waive any of the conditions to this exchange offer prior to the expiration of this exchange offer. Splitco has no right to waive any of the conditions to this exchange offer.

 

 

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Proration; Odd-Lots

If, upon the expiration of this exchange offer, PPG shareholders have validly tendered more shares of PPG common stock than PPG is able to accept for exchange (taking into account the exchange ratio and the total number of shares of Splitco common stock owned by PPG), PPG will accept for exchange the shares of PPG common stock validly tendered and not properly withdrawn by each tendering shareholder on a pro rata basis, based on the proportion that the total number of shares of PPG common stock to be accepted bears to the total number of shares of PPG common stock validly tendered and not properly withdrawn (rounded to the nearest whole number of shares of PPG common stock, and subject to any adjustment necessary to ensure the exchange of all shares of Splitco common stock owned by PPG), except for tenders of odd-lots, as described below.

PPG will announce the proration factor at http://www.edocumentview.com/PPGINDUSTRIES and separately by press release promptly after the expiration date. Upon determining the number of shares of PPG common stock validly tendered for exchange and not properly withdrawn, PPG will announce the final results of the exchange offer, including the final proration factor.

Beneficial holders (other than plan participants in the PPG Employee Savings Plan or PPG Defined Contribution Retirement Plan) of less than 100 shares of PPG common stock who validly tender all of their shares may elect not to be subject to proration by completing the box in the applicable letter of transmittal entitled “Odd-Lot Shares.” If your odd-lot shares are held by a broker for your account, you can contact the broker and request this preferential treatment. All of your odd-lot shares will be accepted for exchange without proration if PPG completes this exchange offer.

Fractional Shares

Immediately following the consummation of this exchange offer, Merger Sub will be merged with and into Splitco, whereby the separate corporate existence of Merger Sub will cease and Splitco will continue as the surviving company and a wholly-owned subsidiary of Georgia Gulf. Each outstanding share of Splitco common stock will be converted into the right to receive a number of shares of Georgia Gulf common stock equal to (a) the greater of (i) 35,200,000 shares of Georgia Gulf common stock or (ii) the product of (x) the number of shares of Georgia Gulf common stock issued and outstanding immediately prior to the effective time of the Merger multiplied by (y) 1.02020202, divided by (b) the number of shares of Splitco common stock issued and outstanding immediately prior to the effective time of the Merger. In this conversion of shares of Splitco common stock into shares of Georgia Gulf common stock, no fractional shares of Georgia Gulf common stock will be delivered to holders of Splitco common stock. All fractional shares of Georgia Gulf common stock that a holder of shares of Splitco common stock would otherwise be entitled to receive as a result of the Merger will be aggregated by Georgia Gulf’s transfer agent. The transfer agent will cause the whole shares obtained thereby to be sold on behalf of such holders of shares of Splitco common stock that would otherwise be entitled to receive such fractional shares of Georgia Gulf common stock in the Merger, in the open market or otherwise as reasonably directed by PPG, and in no case later than five business days after the Merger. The transfer agent will make available the net proceeds thereof, after deducting any required withholding taxes and brokerage charges, commissions and transfer taxes, on a pro rata basis, without interest, as soon as practicable to the holders of Splitco common stock that would otherwise be entitled to receive such fractional shares of Georgia Gulf common stock in the Merger.

Procedures for Tendering

For you to validly tender your shares of PPG common stock pursuant to this exchange offer, prior to the expiration of this exchange offer:

 

   

If you hold shares of PPG common stock, you must deliver to the exchange offer agent at an address listed on the letter of transmittal for PPG common stock you will receive, a properly completed and

 

 

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duly executed letter of transmittal, along with any required signature guarantees and any other required documents, and in the case of shares held in certificated form, book-entry via DRS, the certificates representing the shares of PPG common stock tendered.

 

   

If you hold shares of PPG common stock through a broker, you should receive instructions from your broker on how to participate in this exchange offer. In this situation, do not complete a letter of transmittal to tender your PPG common stock. Please contact your broker directly if you have not yet received instructions. Some financial institutions may also effect tenders by book-entry transfer through The Depository Trust Company.

 

   

If you hold shares of PPG common stock through the PPG Employee Savings Plan or PPG Defined Contribution Retirement Plan, you should receive instructions from the plan record keeper via letter or email informing you how to make an election. In this situation, do not complete a letter of transmittal to tender your shares of PPG common stock. Please contact the toll-free plan information line to speak with a customer service associate if you have not yet received instructions.

Delivery of Shares of Splitco Common Stock

Upon consummation of this exchange offer, PPG will irrevocably deliver to the exchange offer agent a global certificate representing all of the Splitco common stock being exchanged in this exchange offer, with irrevocable instructions to hold the shares of Splitco common stock in trust for the holders of shares of PPG common stock validly tendered and not properly withdrawn in the exchange offer and, in the case of a pro rata distribution, if any, PPG shareholders whose shares of PPG common stock remain outstanding after the consummation of the exchange offer. Georgia Gulf will deposit with the transfer agent for the benefit of persons who received shares of Splitco common stock in this exchange offer certificates or book-entry authorizations representing shares of Georgia Gulf common stock, with irrevocable instructions to hold the shares of Georgia Gulf common stock in trust for the holders of Splitco common stock. Shares of Georgia Gulf common stock will be delivered immediately following the expiration of this exchange offer, the acceptance of PPG common stock for exchange, the determination of the final proration factor, if any, and the effectiveness of the Merger, pursuant to the procedures determined by the exchange offer agent and PPG’s transfer agent. See “This Exchange Offer—Terms of this Exchange Offer—Exchange of Shares of PPG Common Stock.”

Withdrawal Rights

You may withdraw your tendered PPG common stock at any time prior to the expiration of this exchange offer by following the procedures described herein. If you change your mind again, you may re-tender your PPG common stock by again following the exchange offer procedures prior to the expiration of this exchange offer.

When Distributed and When Issued Markets

PPG will announce the preliminary proration factor by press release promptly after the expiration of the exchange offer. At the expiration of the guaranteed delivery period (three NYSE trading days following the expiration of the exchange offer), PPG will confirm the final results of the exchange offer, including the final proration factor, with the exchange agent. Promptly after the final results are confirmed, PPG will issue a press release announcing the final results of the exchange offer, including the final proration factor.

PPG has been informed by the NYSE that, in the event a proration is necessary, the NYSE expects to create a “when distributed” market for the shares of PPG common stock not accepted for exchange in the exchange offer if the NYSE determines that the creation of such a market would be useful to allow investors to facilitate transactions in those shares. The “when distributed” market would be created promptly following PPG’s

 

 

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announcement of the preliminary proration factor. In the “when distributed” market, PPG shareholders whose shares are not accepted for exchange in the exchange offer will be able to sell their rights to receive shares of PPG common stock when those shares are returned by PPG as described above. Such selling shareholders will, however, retain voting and dividend rights with respect to shares sold in the “when distributed” market accruing to shareholders of record as of any record date occurring prior to the date those shares are returned. Purchasers of shares of PPG common stock in the “when distributed” market will acquire the right to receive the shares of PPG common stock when those shares are returned by PPG as described above but will not acquire voting or dividend rights with respect to those shares until those shares are received by the record holder and credited to the account of the purchaser. After the shares of PPG common stock not accepted for exchange in the exchange offer are returned, “when distributed” trading with respect to shares of PPG common stock will end.

In addition, Georgia Gulf has been informed by NYSE that it expects to create a “when issued” market for the new shares of Georgia Gulf common stock issuable to PPG shareholders whose shares of PPG common stock are accepted for exchange in the exchange offer promptly following PPG announcement of the preliminary proration factor. In the “when issued” market, PPG shareholders whose shares are accepted for exchange in the exchange offer will be able to sell their rights to receive shares of Georgia Gulf common stock when those shares are issued and delivered by Georgia Gulf’s transfer agent. Purchasers of shares of Georgia Gulf common stock in the “when issued” market will acquire the right to receive shares of Georgia Gulf common stock when those shares are issued and delivered by Georgia Gulf’s transfer agent. These rights are not actual shares of Georgia Gulf common stock and do not entitle holders to voting or dividend rights with respect to shares of Georgia Gulf common stock. After the shares of Georgia Gulf common stock issuable to PPG shareholders are issued and delivered, “when issued” trading with respect to shares of Georgia Gulf common stock will end.

Any trades made in the “when distributed” and “when issued” markets will be made contingent on the actual return of shares of PPG common stock or issuance and delivery of shares of Georgia Gulf common stock, as the case may be. The creation of a “when distributed” or “when issued” market is outside the control of PPG and Georgia Gulf. NYSE is not required to create a “when distributed” or “when issued” market, and there can be no assurances that either such market will develop or if they develop the prices at which shares will trade.

No Appraisal Rights

No appraisal rights are available to holders of PPG common stock in connection with this exchange offer or any pro rata distribution of shares of Splitco common stock.

Distribution of Any Shares of Splitco Common Stock Remaining After this Exchange Offer

All shares of Splitco common stock owned by PPG that are not exchanged in this exchange offer will be distributed on a pro rata basis to the holders of shares of PPG common stock immediately following the consummation of this exchange offer, with a record date to be announced by PPG on such date. Any PPG shareholder who validly tenders (and does not properly withdraw) shares of PPG common stock for shares of Splitco common stock in the exchange offer will waive their rights with respect to such shares to receive, and forfeit any rights to, shares of Splitco common stock distributed on a pro rata basis to PPG shareholders in the event the exchange offer is not fully subscribed.

If this exchange offer is consummated, the exchange offer agent will calculate the exact number of shares of Splitco common stock not exchanged in this exchange offer to be distributed on a pro rata basis, and that number of shares of Splitco common stock will be held in trust for holders of PPG common stock entitled thereto.

If this exchange offer is terminated by PPG without the exchange of shares, but the conditions for consummation of the Transactions have otherwise been satisfied, PPG intends to distribute all shares of Splitco

 

 

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common stock owned by PPG on a pro rata basis to the holders of PPG common stock and deferred stock awards, with a record date to be announced by PPG.

Legal Limitations; Certain Matters Relating to Non-U.S. Jurisdictions

This document is not an offer to buy, sell or exchange and it is not a solicitation of an offer to buy or sell any shares of PPG common stock, shares of Georgia Gulf common stock, or shares of Splitco common stock in any jurisdiction in which the offer, sale or exchange is not permitted. Countries outside the United States generally have their own legal requirements that govern securities offerings made to persons resident in those countries and often impose stringent requirements about the form and content of offers made to the general public. None of PPG, Georgia Gulf or Splitco have taken any action under non-U.S. regulations to facilitate a public offer to exchange the shares of PPG common stock, Georgia Gulf common stock or Splitco common stock outside the United States. Accordingly, the ability of any non-U.S. person to tender shares of PPG common stock in the exchange offer will depend on whether there is an exemption available under the laws of such person’s home country that would permit the person to participate in the exchange offer without the need for PPG, Georgia Gulf or Splitco to take any action to facilitate a public offering in that country or otherwise. For example, some countries exempt transactions from the rules governing public offerings if they involve persons who meet certain eligibility requirements relating to their status as sophisticated or professional investors.

Non-U.S. shareholders should consult their advisors in considering whether they may participate in the exchange offer in accordance with the laws of their home countries and, if they do participate, whether there are any restrictions or limitations on transactions in the shares of PPG common stock, Georgia Gulf common stock or Splitco common stock that may apply in their home countries. None of PPG, Georgia Gulf or Splitco can provide any assurance about whether such limitations may exist. See “This Exchange Offer—Certain Matters Relating to Non-U.S. Jurisdictions” for additional information about limitations on the exchange offer outside the United States.

Risk Factors

In deciding whether to tender your shares of PPG common stock in this exchange offer, you should carefully consider the matters described in the section “Risk Factors,” as well as other information included in this document and the other documents to which you have been referred.

Debt Financing

In connection with the entry into the Merger Agreement, PPG and Georgia Gulf entered into certain commitment letters with other parties thereto pursuant to which those parties agreed to provide various financing in connection with the Transactions. The terms of the debt financing, including any conditions thereto and covenants thereunder, will be set out in various definitive documentation to be entered into by the respective parties. See “Debt Financing”.

Board of Directors and Management of Georgia Gulf Following the Transactions

Following the consummation of the exchange offer, Merger Sub will merge with and into Splitco, whereby the separate corporate existence of Merger Sub will cease and Splitco will continue as the surviving company and a wholly owned subsidiary of Georgia Gulf. In connection with the Merger, Georgia Gulf will increase the size of its board of directors by three members, and three individuals selected by PPG and approved by the Nominating and Governance Committee of the board of directors of Georgia Gulf will be appointed to fill the vacancies. In accordance with the Merger Agreement, these individuals will also be nominated for re-election to the board of directors of Georgia Gulf at Georgia Gulf’s 2013 annual meeting of stockholders. The executive officers of Georgia Gulf immediately prior to the consummation of the Merger are expected to be the executive officers of Georgia Gulf immediately following the consummation of the Merger.

 

 

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Georgia Gulf Stockholder Vote

Georgia Gulf cannot complete the Transactions unless the proposal relating to the issuance of shares of Georgia Gulf common stock in the Merger is approved by the affirmative vote of a majority of the shares of Georgia Gulf common stock represented and voting at the special meeting, either in person or by proxy (provided that the total votes cast on the proposal represent over 50% in interest of all shares entitled to vote on the proposal).

Accounting Treatment and Considerations

ASC 805, Business Combinations, requires the use of the acquisition method of accounting for business combinations. In applying the acquisition method, it is necessary to identify both the accounting acquiree and the accounting acquiror. In a business combination effected through an exchange of equity interests, such as the Merger, the entity that issues the interests (Georgia Gulf in this case) is generally the acquiring entity. In identifying the acquiring entity in a combination effected through an exchange of equity interests, however, all pertinent facts and circumstances must be considered, including the following:

 

   

The relative voting interests of Georgia Gulf after the Transactions. In this case, PPG shareholders participating in the exchange offer (and pro rata distribution, if any) are expected to receive at least 50.5% of the equity ownership and associated voting rights in Georgia Gulf after the Transactions.

 

   

The composition of the governing body of Georgia Gulf after the Transactions. In this case, the board of directors of Georgia Gulf immediately following the Merger will consist of the members of the board of directors of Georgia Gulf immediately prior to the consummation of the Merger. In addition, as of the consummation of the Merger, Georgia Gulf will increase the size of its board of directors by three members, and three individuals selected by PPG and approved by the Nominating and Governance Committee of the board of directors of Georgia Gulf will be appointed to fill the vacancies.

 

   

The composition of the senior management of Georgia Gulf after the Transactions. In this case, Georgia Gulf’s executive officers following the Merger will consist of Georgia Gulf’s executive officers immediately prior to the Merger.

Georgia Gulf’s management has determined that Georgia Gulf will be the accounting acquiror in the Merger based on the facts and circumstances outlined above and the detailed analysis of the relevant GAAP guidance. Consequently, Georgia Gulf will apply acquisition accounting to the assets acquired and liabilities assumed of Splitco upon consummation of the Merger. Upon consummation of the Merger, the historical financial statements will reflect only the operations and financial condition of Georgia Gulf.

Material U.S. Federal Income Tax Consequences of the Distribution and the Merger

The consummation of the Distribution (which includes this exchange offer) and related transactions is conditioned upon the receipt of the Private Letter Ruling (as defined below under the heading “The Transactions—Material U.S. Federal Income Tax Consequences of the Distribution and the Merger—The Distribution”) (which has been obtained) and the Distribution Tax Opinion (as defined below under the heading “This Exchange Offer—Material U.S. Federal Income Tax Consequences of the Distribution and the Merger—The Distribution”). On the basis that the Distribution, together with certain related transactions, qualifies as a “reorganization” for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code, in general, for U.S. federal income tax purposes, no gain or loss will be recognized by, and no amount will be included in the income of, U.S. holders of PPG common stock upon the receipt of Splitco common stock in this exchange offer or in any pro rata distribution of Splitco common stock distributed to holders of PPG common stock if this exchange offer is undersubscribed (or if PPG determines not to consummate the exchange offer).

 

 

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The consummation of the Merger is conditioned upon the receipt of the Private Letter Ruling (which has been obtained) and the Distribution Tax Opinion described above, as well as the Merger Tax Opinions (as defined below under the heading “This Exchange Offer—Material U.S. Federal Income Tax Consequences of the Distribution and the Merger—The Merger”). On the basis that the Merger qualifies as a “reorganization” within the meaning of Section 368(a) of the Code, in general, for U.S. federal income tax purposes, no gain or loss will be recognized by, and no amount will be included in the income of, U.S. holders of Splitco common stock upon the receipt of shares of Georgia Gulf common stock in the Merger, except for any gain or loss recognized with respect to cash received in lieu of a fractional share of Georgia Gulf common stock.

Although a Private Letter Ruling from the IRS generally is binding on the IRS, PPG and Splitco will not be able to rely on the ruling if the factual representations made to the IRS in connection with the private letter ruling request are untrue or incomplete in any material respect, or if undertakings made to the IRS in connection with the request for the Private Letter Ruling have been violated. If the Distribution and/or the Merger fails to qualify for tax–free treatment, PPG and/or its shareholders will be subject to tax. See “Risk Factors—Risks Related to the Transactions—If the Distribution, including the Debt Exchange, does not qualify as a tax-free transaction under Section 368(a)(1)(D) or 355 of the Code or the Merger does not qualify as a tax-free “reorganization” under section 368(a) of the Code, including as a result of actions taken in connection with the Distribution or the Merger or as a result of subsequent acquisitions of shares of PPG, Georgia Gulf or Splitco stock, then PPG and/or PPG shareholders may be required to pay substantial U.S. federal income taxes, and in certain circumstances and subject to certain conditions, Splitco and Georgia Gulf may be required to indemnify PPG for any such tax liability.”

Tax matters are complicated and the tax consequences of the Transactions to you will depend on the facts of your own situation. You should read the summary in the section of this document entitled “This Exchange Offer—Material U.S. Federal Income Tax Consequences of the Distribution and the Merger” and consult your own tax advisor for a full understanding of the tax consequences to you of the Transactions.

 

 

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SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA

The following summary combined financial data of the PPG Chlor-alkali and Derivatives Business and summary consolidated financial data of PPG and Georgia Gulf are being provided to help you in your analysis of the financial aspects of the Transactions. You should read this information in conjunction with the financial information included elsewhere and incorporated by reference into this document. See “Where You Can Find More Information; Incorporation by Reference,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations for the PPG Chlor-alkali and Derivatives Business,” “Information on the PPG Chlor-alkali and Derivatives Business,” “Information on PPG,” “Information on Georgia Gulf,” and “Selected Historical and Pro Forma Financial Data.”

Summary Historical Combined Financial Data of the PPG Chlor-alkali and Derivatives Business

The following summary historical combined financial data of the PPG Chlor-alkali and Derivatives Business for the years ended December 31, 2011, December 31, 2010 and December 31, 2009 and as of December 31, 2011 and December 31, 2010 has been derived from the audited combined financial statements of the PPG Chlor-alkali and Derivatives Business. The following summary historical condensed combined financial data of the PPG Chlor-alkali and Derivatives Business for the nine-month periods ended September 30, 2012 and September 30, 2011, and as of September 30, 2012, September 30, 2011 and December 31, 2009, has been derived from the unaudited condensed combined financial statements of the PPG Chlor-alkali and Derivatives Business, but is not necessarily indicative of the results or the financial condition to be expected for the remainder of the year or any future date or period. The management of the PPG Chlor-alkali and Derivatives Business believes that the unaudited condensed combined financial statements reflect all normal and recurring adjustments necessary for a fair presentation of the results as of and for the interim periods presented. This information is only a summary and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations for the PPG Chlor-alkali and Derivatives Business” and the financial statements of the PPG Chlor-alkali and Derivatives Business and the notes thereto included elsewhere in this document.

 

    Nine Months
Ended  September 30,
    Year Ended
December 31,
 
        2012             2011         2011     2010     2009  
(In Millions)      

Statement of Income Data:

         

Net sales

  $ 1,292      $ 1,340      $ 1,741      $ 1,441      $ 1,282   

Cost of sales, exclusive of depreciation and amortization

    884        927        1,224        1,117        1,001   

Selling, general and administrative

    91        91        123        102        100   

Depreciation and amortization

    32        31        41        39        40   

Research and development—net

    1        1        2        2        2   

Business restructuring

    1        —          —          —          6   

Other charges

    8        9        10        11        9   

Other earnings

 

 

 

 

(13

 

 

 

 

 

(25

 

    (27     (7     (12
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

 

 

 

 

288

 

  

 

 

 

 

306

 

  

    368        177        136   

Income tax expense

 

 

 

 

95

 

  

 

 

 

 

102

 

  

    122        65        43   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to the controlling and noncontrolling interests

 

 

 

 

193

 

  

 

 

 

 

204

 

  

    246        112        93   

Less: Net income attributable to noncontrolling interests

 

 

 

 

(10

 

 

 

 

 

(9

 

    (13     (7     (5
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (attributable to the PPG Chlor-alkali and Derivatives Business)

 

 

 

$

 

 

183

 

 

  

 

 

 

$

 

 

195

 

 

  

  $ 233      $ 105      $ 88   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance Sheet Data (at end of period):

         

Total assets

  $ 786      $ 718      $ 734      $ 621      $ 601   

Working capital

  $ 176      $ 131      $ 119      $ 81      $ 77   

Other long-term obligations

  $ 318      $ 274      $ 320      $ 268      $ 264   

Total Parent company shareholders’ equity

  $ 241      $ 222      $ 181      $ 132      $ 130   

Cash Flow Data:

         

Cash from operating activities

  $ 172      $ 191      $ 276      $ 142      $ 133   

Cash used for investing activities

  $ (31   $ (56   $ (86   $ (43   $ (22

Cash used for financing activities

  $ (153   $ (131   $ (174   $ (95   $ (123

 

 

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Summary Historical Consolidated Financial Data of PPG

The following summary historical consolidated financial data of PPG as of and for each of the fiscal years in the three-year period ended December 31, 2011 has been derived from the audited consolidated financial statements of PPG incorporated by reference in this document (except for the balance sheet financial data as of December 31, 2009, which is not incorporated by reference in this document). The following summary historical condensed consolidated financial data of PPG as of and for each of the nine-month periods ended September 30, 2012 and September 30, 2011 has been derived from the unaudited condensed consolidated financial statements of PPG incorporated by reference in this document but is not necessarily indicative of the results or financial condition to be expected for the remainder of the year or any future period. PPG’s management believes that the unaudited condensed consolidated financial data reflects all normal and recurring adjustments necessary for a fair presentation of the data for the interim periods presented. This information is only a summary and should be read in conjunction with the financial statements of PPG and the notes thereto and the “Management’s Discussion and Analysis of Financial Condition and Results of Operation” section contained in PPG’s annual report on Form 10-K for the year ended December 31, 2011 and quarterly report on Form 10-Q for the quarter ended September 30, 2012, each of which is incorporated by reference into this document. See “Where You Can Find More Information; Incorporation By Reference.”

 

    Nine Months
Ended September 30
    Year Ended December 31,  
    2012     2011     2011     2010     2009  
(In Millions)      

Statement of Income Data:

         

Net sales

  $ 11,552      $ 11,368      $ 14,885      $ 13,423      $ 12,239   

Cost of sales, exclusive of depreciation and amortization

    6,869        6,897        9,081        8,214        7,539   

Gross profit

    4,683        4,471        5,804        5,209        4,700   

Selling, general and administrative expenses

    2,488        2,432        3,234        2,979        2,936   

Depreciation

    265        260        346        346        354   

Amortization

    83        92        121        124        126   

Research and development—net

    337        321        430        394        388   

Interest expense

    155        159        210        189        193   

Interest income

    (29     (32     (42     (34     (28

Asbestos settlement—net

    9        9        12        12        13   

Business restructuring

    208        —          —          —          186   

Other charges

    214        60        73        84        65   

Other earnings

    (111     (143     (177     (180     (150
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

    1,064        1,313        1,597        1,295        617   

Income tax expense

    253        340        385        415        191   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to the controlling and non controlling interests

    811        973        1,212        880        426   

Less: Net income attributable to noncontrolling interests

    (97     (94     (117     (111     (90
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (attributable to PPG)

  $ 714      $ 879      $ 1,095      $ 769      $ 336   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income per share—basic

  $ 4.66      $ 5.55      $ 6.96      $ 4.67      $ 2.04   

Net income per share—assuming dilution

  $ 4.61      $ 5.48      $ 6.87      $ 4.63      $ 2.03   

Balance Sheet Data (at end of period):

         

Total assets

  $ 15,606      $ 14,543      $ 14,382      $ 14,975      $ 14,240   

Working capital

  $ 3,287      $ 3,152      $ 2,992      $ 3,433      $ 2,404   

Current assets

  $ 7,777      $ 6,940      $ 6,694      $ 7,058      $ 5,981   

Noncurrent assets

  $ 7,829      $ 7,603      $ 7,688      $ 7,917      $ 8,259   

Current liabilities

  $ 4,490      $ 3,788      $ 3,702      $ 3,625      $ 3,577   

Noncurrent liabilities

  $ 6,984      $ 6,849      $ 7,234      $ 7,517      $ 6,741   

Long-term debt less current portion

  $ 3,365      $ 3,590      $ 3,574      $ 4,043      $ 3,074   

 

 

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    Nine Months
Ended September 30
    Year Ended December 31,  
    2012     2011     2011     2010     2009  
(In Millions)      

Other long-term obligations

  $ 3,619      $ 3,259      $ 3,660      $ 3,474      $ 3,667   

Noncontrolling interests

  $ 271      $ 244      $ 197      $ 195      $ 169   

Total PPG shareholders’ equity

  $ 3,861      $ 3,662      $ 3,249      $ 3,638      $ 3,753   

Cash Flow Data:

         

Cash from operating activities

  $ 1,039      $ 777      $ 1,436      $ 1,310      $ 1,345   

Cash (used for) from investing activities

  $ (876   $ 494      $ 353      $ (949   $ (203

Cash used for financing activities

  $ (241   $ (1,270   $ (1,632   $ (104   $ (1,123

 

     Nine Months
Ended
September 30,
     Year Ended December 31,  
     2012      2011      2010      2009      2008      2007  
(Dollars in millions)                                          

Ratio of Earnings to Fixed Charges

                 

Earnings:

                 

Earnings before income taxes and net earnings in equity affiliates

   $ 1,032       $ 1,539       $ 1,247       $ 620       $ 904       $ 1,282   

Plus:

                 

Fixed charges exclusive of capitalized interest

     216         292         266         273         343         156   

Amortization of capitalized interest

     6         7         7         7         7         7   

Adjustments for equity affiliates

     —           19         6         11         18         21   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 1,254       $ 1,857       $ 1,526       $ 911       $ 1,272       $ 1,466   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Fixed Charges:

                 

Interest expense including amortization of debt discount/premium and debt expense

   $ 155       $ 210       $ 189       $ 193       $ 254       $ 93   

Rentals – portion representative of interest

     61         82         77         80         89         63   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Fixed charges exclusive of capitalized interest

     216         292         266         273         343         156   

Capitalized interest

     6         9         7         8         8         11   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 222       $ 301       $ 273       $ 281       $ 351       $ 167   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Ratio of earnings to fixed charges

     5.6         6.2         5.6         3.2         3.6         8.8   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The financial information of all prior periods has been reclassified to reflect discontinued operations.

 

 

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Summary Historical Consolidated Financial Data of Georgia Gulf

The following summary historical consolidated financial data of Georgia Gulf for the years ended December 31, 2011, 2010 and 2009, and as of such dates, has been derived from Georgia Gulf’s audited consolidated financial statements as of and for the years ended December 31, 2011, 2010 and 2009. The following summary historical consolidated financial data as of and for the nine-month periods ended September 30, 2012 and 2011 has been derived from the unaudited condensed consolidated financial statements of Georgia Gulf and is not necessarily indicative of the results or financial condition to be expected for the remainder of the year or for any future period. Georgia Gulf’s management believes that the unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results and the financial condition as of and for the interim periods presented. This information is only a summary and should be read in conjunction with the financial statements of Georgia Gulf and the notes thereto and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section contained in Georgia Gulf’s annual report on Form 10-K for the year ended December 31, 2011 and quarterly report on Form 10-Q for the period ended September 30, 2012, each of which is incorporated by reference into this document. See “Where You Can Find More Information; Incorporation by Reference.”

 

(In millions, except per share data,

percentages and employees)

   As of and for the
Nine Months
Ended September 30,
    As of and for the
Year Ended December 31,
 
   2012      2011     2011     2010     2009  

Results of Operations:

           

Net sales

   $ 2,541       $ 2,549      $ 3,223      $ 2,818      $ 1,990   

Cost of sales

     2,210         2,292        2,920        2,544        1,779   

Selling, general and administrative expenses

     153         130        168        160        183   

Long-lived asset impairment charges

     —           —          8        —          22   

Transaction related costs, restructuring and other, net

     26         1        3        —          7   

(Gains) losses on sale of assets

     (19      (1     (1     —          —     
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     171         127        125        114        (1

Interest expense

     (44      (50     (65     (69     (131

Loss on redemption and other debt costs

     —           (1     (5     —          (43

Gain on debt exchange

     —           —          —          —          401   

Foreign exchange loss

     (1      (1     (1     (1     (1

Interest income

     —           —          —          —          1   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations before taxes

     126         75        54        44        226   

Provision (benefit) for income taxes

     38         14        (4     1        95   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

     88         61        58        43        131   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 88       $ 61      $ 58      $ 43      $ 131   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Basic earnings per share

   $ 2.54       $ 1.75      $ 1.66      $ 1.22      $ 8.27   

Diluted earnings per share

   $ 2.53       $ 1.75      $ 1.66      $ 1.22      $ 8.26   

Financial Highlights:

           

Net working capital

   $ 448       $ 407      $ 385      $ 400      $ 341   

Property, plant and equipment, net

     637         641        641        653        688   

Total assets

     1,801         1,835        1,644        1,666        1,605   

Total debt

     498         592        497        578        633   

Lease financing obligation

     114         108        110        112        106   

Net cash (used in) provided by operating activities

     66         20        187        184        1   

 

 

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(In millions, except per share data,

percentages and employees)

   As of and for the
Nine Months Ended
September 30,
    As of and for the
Year Ended December 31,
 
   2012     2011     2011     2010     2009  

Net cash (used in) investing activities

     (32     (115     (137     (45     (26

Net cash (used in) provided by financing activities

     (5     16        (86     (56     (29

Depreciation and amortization

     68        78        102        100        117   

Capital expenditures

     56        44        66        46        30   

Acquisition, net of cash acquired

     —          71        71        —          —     

Maintenance expenditures

     129        107        109        137        104   

Other Selected Data:

          

Adjusted EBITDA(1)

   $ 237      $ 194      $ 223      $ 201      $ 155   

Weighted average common shares outstanding—basic

     34        34        34        34        15   

Weighted average common shares outstanding—diluted

     35        34        34        34        15   

Common shares outstanding

     35        34        34        34        34   

Return on sales

     3.5     2.4     1.8     1.5     5.8 %

Employees

     3,758        3,994        3,744        3,619        3,489   

 

(1) For the reconciliation of Adjusted EBITDA to net income determined in accordance with GAAP, see “Selected Historical and Pro Forma Financial Data — Selected Historical Consolidated Financial Data of Georgia Gulf.”

Summary Unaudited Pro Forma Condensed Consolidated Financial Data for PPG Reflecting the Transactions

The following summary unaudited pro forma condensed consolidated financial information of PPG is being presented for illustrative purposes only, and this information should not be relied upon for purposes of making any investment or other decisions. The following summary unaudited pro forma condensed consolidated financial data assumes that the PPG Chlor-alkali and Derivatives Business had been split off from PPG and combined with Georgia Gulf during all periods and at the date presented and that the exchange offer was fully subscribed and consummated at the start of each period and for the date presented. PPG may have performed differently had the Transactions actually occurred, or the exchange offer been fully subscribed and consummated, prior to all periods or on the date presented. You should also not rely on the following summary unaudited pro forma condensed consolidated financial data as being indicative of the results or financial condition that would have been achieved had the Transactions occurred, or the exchange offer been fully subscribed and consummated, other than during the periods or on the date presented or of the actual future results or financial condition of PPG to be achieved following the Transactions and the consummation of the exchange offer.

 

     As of and for the
Nine Months Ended
September 30,
     Year Ended
December 31,
 
     2012      2011  
(In millions, except per share data)       

Statement of Operations Data:

     

Net Sales

   $ 10,260       $ 13,144   

Cost of sales

     5,985         7,856   

Gross profit

     4,275         5,288   

Net income attributable to the controlling and non controlling interests

     612         958   

Net income (attributable to PPG)

     525         854   

Basic earnings per share

   $ 3.64       $ 5.76   

Diluted earnings per share

   $ 3.60       $ 5.69   

 

 

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     Nine Months Ended
September 30,
 
     2012  
(In millions, except per share data)       

Financial Highlights

  

Current assets

   $ 8,283   

Noncurrent assets

     7,435   

Total assets

     15,718   

Current liabilities

     4,280   

Noncurrent liabilities

     6,672   

Total liabilities

     10,952   

Noncontrolling interests

     256   

Weighted average shares outstanding—basic

     144.1   

Weighted average shares outstanding—diluted

     145.7   

Book value per share

   $ 30.95   

 

     Nine Months Ended
September 30,
     Year Ended
December 31,
 
     2012      2011  
(Dollars in millions)              

Ratio of Earnings to Fixed Charges

     

Earnings:

     

Earnings before income taxes and net earnings in equity affiliates

   $ 751       $ 1,177   

Plus:

     

Fixed charges exclusive of capitalized interest

     206         278   

Amortization of capitalized interest

     6         7   

Adjustments for equity affiliates

     —           20   
  

 

 

    

 

 

 

Total

   $ 963       $ 1,482   
  

 

 

    

 

 

 

Fixed Charges:

     

Interest expense including amortization of debt discount/premium and debt expense

   $ 155       $ 210   

Rentals – portion representative of interest

     51         68   
  

 

 

    

 

 

 

Fixed charges exclusive of capitalized interest

     206         278   

Capitalized interest

     6         9   
  

 

 

    

 

 

 

Total

   $ 212       $ 287   
  

 

 

    

 

 

 

Ratio of earnings to fixed charges

     4.5         5.2   
  

 

 

    

 

 

 

The financial information of all prior periods has been reclassified to reflect discontinued operations.

 

 

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Summary Unaudited Pro Forma Condensed Combined Financial Information of Georgia Gulf and the PPG Chlor-alkali and Derivatives Business

The following summary unaudited pro forma condensed combined financial information of Georgia Gulf and the PPG Chlor-alkali and Derivatives Business is being presented for illustrative purposes only, and this information should not be relied upon for purposes of making any investment or other decisions. The following summary unaudited pro forma condensed combined financial data assumes that the PPG Chlor-alkali and Derivatives Business had been owned by Georgia Gulf for all periods, and at the date presented. Georgia Gulf and the PPG Chlor-alkali and Derivatives Business may have performed differently had they actually been combined for all periods or on the date presented. You should also not rely on the following summary unaudited pro forma condensed combined financial data as being indicative of the results or financial condition that would have been achieved had Georgia Gulf and the PPG Chlor-alkali and Derivatives Business been combined other than during the periods or on the date presented or of the actual future results or financial condition of Georgia Gulf to be achieved following the Transactions.

 

     As of and for the
Nine Months Ended
September 30, 2012
     For the
Year Ended
December 31,
2011
 
(In millions, except per share data)              

Results of Operations:

     

Net sales

   $ 3,794       $ 4,876   

Cost of sales

     3,109         4,134   

Net income

     220         203   

Net income attributable to controlling shareholders

     212         193   

Basic earnings per share

   $ 3.03       $ 2.75   

Diluted earnings per share

   $ 3.02       $ 2.75   

Financial Highlights:

     

Total assets

   $ 5,381      

Total liabilities

     3,104      

Other Selected Data:

     

Adjusted EBITDA(1)

   $ 561       $ 637   

Weighted average common shares outstanding—basic

     70         69   

Weighted average common shares outstanding—diluted

     70         69   

 

(1) In addition to evaluating financial condition and results of operations in accordance with GAAP, management of Georgia Gulf also reviews and evaluates certain alternative financial measures not prepared in accordance with GAAP. Non-GAAP measures do not have definitions under GAAP and may be defined differently by and not be comparable to, similarly titled measures used by other companies. As a result, management of Georgia Gulf considers and evaluates non-GAAP measures in connection with a review of the most directly comparable measure calculated in accordance with GAAP. Management of Georgia Gulf cautions investors not to place undue reliance on such non-GAAP measures, but also to consider them with the most directly comparable GAAP measure.

In this document, Georgia Gulf supplements its financial information prepared in accordance with GAAP with Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization, cash and non-cash restructuring and certain other costs related to financial restructuring and business improvement initiatives, gains or losses on substantial modification of debt and sales of certain assets, certain purchase accounting and certain non-income tax reserve adjustments, professional fees related to a previously disclosed and withdrawn unsolicited offer and the Merger, goodwill, intangibles, and other long-lived asset impairments, and interest expense related to the OMERS sale-leaseback transaction) because Georgia Gulf believes

 

 

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investors commonly use Adjusted EBITDA as a main component of valuing cyclical companies such as Georgia Gulf. Adjusted EBITDA is not a measurement of financial performance under GAAP and should not be considered as an alternative to net income (loss) as a measure of performance or to cash provided by operating activities as a measure of liquidity. In addition, Georgia Gulf’s calculation of Adjusted EBITDA may be different from the calculation used by other companies and, therefore, comparability may be limited.

A reconciliation of Adjusted EBITDA to net income (loss) determined in accordance with GAAP is provided below:

 

     Nine Months Ended September 30, 2012  
     Historical     Pro Forma Adjustments        
(in millions)    Georgia Gulf     PPG Chlor-
alkali and
Derivatives
Business
    Acquisition
Adjustments
    Financing
Adjustments
    Pro Forma
Condensed
Combined
 

Net income

   $ 88.3      $ 193.0      $ (34.4   $ (26.9   $ 220.0   

Net income attributable to non-controlling interests

     —          (10.0     2.1        —          (7.9

(Benefit) provision for income taxes

     38.1        95.0        (20.7     (16.1     96.3   

Interest income

     (0.2     —          —          —          (0.2

Interest expense

     43.8        —          —          43.0        86.8   

Depreciation and amortization expense

     68.0        32.0        82.4        —          182.4   

Transaction related costs, restructuring and other, net

     26.4        1.0        (16.3     —          11.1   

(Gains) losses on sale of assets

     (19.3     —          —          —          (19.3

Other(a)

     (8.6     —          —          —          (8.6
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 236.5      $ 311.0      $ 13.1      $ —        $ 560.6   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     Year Ended December 31, 2011  
     Historical     Pro Forma Adjustments        
(in millions)    Georgia Gulf     PPG Chlor-
alkali and
Derivatives
Business
    Acquisition
Adjustments
    Financing
Adjustments
    Pro Forma
Condensed
Combined
 

Net income

   $ 57.8      $ 246.0      $ (65.2   $ (35.8   $ 202.8   

Net income attributable to non-controlling interests

     —          (13.0     3.0        —          (10.0

(Benefit) provision for income taxes

     (4.3     122.0        (39.1     (21.5     57.1   

Interest income

     (0.3     —          —          —          (0.3

Loss on redemption and other debt costs

     4.9        —          —          —          4.9   

Interest expense

     65.7        —          —          57.3        123.0   

Depreciation and amortization expense

     101.5        41.0        109.8        —          252.3   

Long-lived asset impairment charges

     8.3        —          —          —          8.3   

Restructuring costs

     3.3        —          —          —          3.3   

(Gains) losses on sale of assets

     (1.2     —          —          —          (1.2

Other(a)

     (12.8     —          9.3        —          (3.5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 222.9      $ 396.0      $ 17.8      $ —        $ 636.7   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a)

“Other” for Georgia Gulf for the nine months ended September 30, 2012 consists of $3.0 million of loan cost amortization and $5.5 million of lease financing obligations interest. For the year ended December 31, 2011, “Other” for Georgia Gulf consists of $4.1 million in loan cost amortization, $7.4 million of lease

 

 

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  financing obligations interest and a $4.4 million reversal of non-income tax reserves, partially offset by $3.0 million in acquisition costs and inventory purchase accounting adjustments. For the year ended December 31, 2011, “Other” in the Acquisition Adjustments column consists of $9.3 million inventory purchase accounting adjustment.
(b) The following is a reconciliation of the acquisition adjustments made to depreciation in Note 2, “Acquisition Adjustments” in the Unaudited Pro Forma Condensed Combined Financial Statements to the acquisition adjustments made to depreciation contained in this reconciliation of Adjusted EBITDA:
(in millions)    Nine months
ended
September  30,
2012
     Year ended
December 31,
2011
 

An increase in depreciation expense resulting from an increase in the value of the PPG Chlor-alkali and Derivatives Business’s property, plant and equipment

   $ 28.7       $ 38.2   

An increase in amortization expense resulting from adjustments to intangible assets

     53.7         71.6   
  

 

 

    

 

 

 

Depreciation and amortization expense pro forma acquisition adjustment included in the reconciliation of Adjusted EBITDA to net income (loss) determined in accordance with GAAP

   $ 82.4       $ 109.8   
  

 

 

    

 

 

 

Summary Comparative Historical and Pro Forma Per Share Data

The following table sets forth certain historical and pro forma per share data for Georgia Gulf and PPG. The Georgia Gulf historical data has been derived from and should be read together with Georgia Gulf’s audited consolidated financial statements and related notes thereto contained in Georgia Gulf’s annual report on Form 10-K for the fiscal year ended December 31, 2011, and Georgia Gulf’s unaudited condensed consolidated financial statements and related notes thereto contained in Georgia Gulf’s quarterly report on Form 10-Q for the period ended September 30, 2012, each of which are incorporated by reference into this document. The Georgia Gulf pro forma data has been derived from the unaudited pro forma condensed combined financial statements of Georgia Gulf and the PPG Chlor-alkali and Derivatives Business included elsewhere in this document. The PPG historical data has been derived from and should be read together with the audited consolidated financial statements of PPG and related notes thereto contained in PPG’s Form 10-K for the year ended December 31, 2011 and the unaudited condensed consolidated financial statements of PPG and related notes thereto contained in PPG’s Form 10-Q for the quarter ended September 30, 2012, which are incorporated by reference into this document. The PPG pro forma data has been derived from the unaudited pro forma condensed consolidated financial statements of PPG included elsewhere in this document. See “Where You Can Find More Information; Incorporation by Reference.”

This summary comparative historical and pro forma per share data is being presented for illustrative purposes only. PPG, Georgia Gulf and the PPG Chlor-alkali and Derivatives Business may have performed differently had the Transactions occurred prior to the periods or at the date presented. You should not rely on the pro forma per share data presented as being indicative of the results that would have been achieved had the PPG Chlor-alkali and Derivatives Business been split off from PPG and combined with Georgia Gulf during the periods or at the date presented or of the actual future results or financial condition of PPG, Georgia Gulf or the PPG Chlor-alkali and Derivatives Business to be achieved following the Transactions.

 

 

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     As of and for the
Nine Months Ended
September 30, 2012
     As of and for the
Year Ended
December 31, 2011
 
Georgia Gulf    Historical      Pro Forma      Historical      Pro Forma  
(shares in thousands)                            

Basic earnings per share

   $ 2.54       $ 3.03       $ 1.66       $ 2.75   

Diluted earnings per share

   $ 2.53       $ 3.02       $ 1.66       $ 2.75   

Weighted average common shares outstanding—Basic

     34,413         69,649         34,086         69,332   

Weighted average common shares outstanding—Diluted

     34,641         69,887         34,122         69,367   

Book value per share of common stock

   $ 14.09       $ 30.03       $ 14.05         n/a   

Dividends declared per share of common stock

   $ 0.16       $ 0.16         —           —     
    
 
 
As of and for the
Nine Months Ended
September 30, 2012
  
  
  
    
 
 
As of and for the
Year Ended
December 31, 2011
  
  
  

PPG

     Historical         Pro Forma         Historical         Pro Forma   

Basic earnings per share

   $ 4.66       $ 3.64       $ 6.96       $ 5.76   

Diluted earnings per share

   $ 4.61       $ 3.60       $ 6.87       $ 5.69   

Book value per common share outstanding

   $ 24.94       $ 30.95       $ 20.40         n/a   

Historical Common Stock Market Price and Dividend Data

Historical market price data for Splitco has not been presented as the PPG Chlor-alkali and Derivatives Business is currently operated by PPG and there is no established trading market in Splitco common stock. Shares of Splitco common stock do not currently trade separately from PPG common stock.

Shares of PPG common stock currently trade on the NYSE under the symbol “PPG.” On July 18, 2012, the last trading day before the announcement of the Transactions, the last sale price of PPG common stock reported by the NYSE was $104.19. On December 26, 2012, the last trading day prior to the date of this document, the last sale price of PPG common stock reported by the NYSE was $134.74.

Shares of Georgia Gulf common stock currently trade on the NYSE under the symbol “GGC.” On July 18, 2012, the last trading day before the announcement of the Transactions, the last sale price of Georgia Gulf common stock reported by the NYSE was $28.85. On December 26, 2012, the last trading day prior to the date of this document, the last sale price of Georgia Gulf common stock reported by the NYSE was $41.82.

 

 

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The following table sets forth the high and low sale prices of PPG common stock and Georgia Gulf common stock on the NYSE for the periods indicated as well as the dividends per share declared by PPG to holders of PPG common stock and Georgia Gulf to holders of Georgia Gulf common stock for these periods. The quotations are as reported in published financial sources.

 

     PPG Per
Share

Dividends
     PPG Common Stock      Georgia
Gulf Per
Share

Dividends
     Georgia Gulf  Common
Stock
 
        High      Low             High              Low      

Year Ending December 31, 2012

                 

First Quarter

   $ 0.57       $ 96.40       $ 83.27       $ —         $ 35.56       $ 20.24   

Second Quarter

   $ 0.59       $ 107.95       $ 91.85       $ 0.08       $ 37.24       $ 23.80   

Third Quarter

   $ 0.59       $ 119.86       $ 99.12       $ 0.08       $ 40.88       $ 24.52   

Fourth Quarter (through December 26, 2012)

   $ 0.59       $ 136.22       $ 114.00       $ 0.08       $ 47.17       $ 35.27   

Year Ended December 31, 2011

                 

First Quarter

   $ 0.55       $ 96.56       $ 78.75       $ —         $ 38.15       $ 23.68   

Second Quarter

   $ 0.57       $ 97.81       $ 82.76       $ —         $ 40.59       $ 22.57   

Third Quarter

   $ 0.57       $ 93.85       $ 68.27       $ —         $ 25.35       $ 13.69   

Fourth Quarter

   $ 0.57       $ 90.00       $ 66.43       $ —         $ 20.83       $ 12.19   

Year Ended December 31, 2010

                 

First Quarter

   $ 0.54       $ 66.63       $ 56.96       $ —         $ 19.08       $ 13.91   

Second Quarter

   $ 0.54       $ 72.24       $ 59.01       $ —         $ 21.79       $ 13.26   

Third Quarter

   $ 0.55       $ 73.99       $ 59.69       $ —         $ 17.00       $ 11.11   

Fourth Quarter

   $ 0.55       $ 84.59       $ 72.10       $ —         $ 24.75       $ 15.61   

 

 

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RISK FACTORS

You should carefully consider each of the following risks and all of the other information contained and incorporated by reference in this document and the exhibits hereto. Some of the risks described below relate principally to the business and the industry in which Georgia Gulf, including the PPG Chlor-alkali and Derivatives Business, will operate after the Transactions, while others relate principally to the Transactions and participation in the exchange offer. The remaining risks relate principally to the securities markets generally and ownership of shares of Georgia Gulf common stock. The risks described below are not the only risks that Georgia Gulf currently faces or will face after the consummation of the Transactions or to participating in the exchange offer.

Risks Related to the Transactions

The calculation of the merger consideration will not be adjusted if the value of the business or assets of the PPG Chlor-alkali and Derivatives Business declines or if the value of Georgia Gulf increases before the Merger is completed.

The calculation of the number of shares of Georgia Gulf common stock to be distributed in the Merger will not be adjusted if the value of the business or assets of the PPG Chlor-alkali and Derivatives Business declines prior to the consummation of the Merger or the value of Georgia Gulf increases prior to the Merger. Georgia Gulf will not be required to consummate the Merger if there has been any “material adverse effect” (as this term is described in the section of this document entitled “The Merger Agreement—Representations and Warranties”) on the PPG Chlor-alkali and Derivatives Business. However, Georgia Gulf will not be permitted to terminate the Merger Agreement or resolicit the vote of Georgia Gulf stockholders because of any changes in the market prices of Georgia Gulf’s common stock or any changes in the value of the PPG Chlor-alkali and Derivatives Business that do not constitute a material adverse effect on the PPG Chlor-alkali and Derivatives Business.

Georgia Gulf will incur significant costs related to the consummation of the Transactions that could have a material adverse effect on its liquidity, cash flows and operating results.

Georgia Gulf will incur significant, one-time costs in connection with the Transactions, including approximately (1) $25 to $30 million of advisory, legal, accounting and other professional fees related to the Transactions, (2) $30 to $40 million of financing related fees and (3) $55 million in transition and integration expenses, such as consulting professionals’ fees, information technology implementation costs and relocation and severance costs, that Georgia Gulf management believes are necessary to realize approximately $115.0 million of annualized cost synergies within two years from the consummation of the Transactions. These costs may have a material adverse impact on Georgia Gulf’s liquidity, cash flows and operating results in the periods in which they are incurred.

Georgia Gulf will have a substantial amount of long-term indebtedness and liabilities following the Transactions, which could adversely affect its liquidity, operations and financial condition.

Georgia Gulf has a significant amount of indebtedness and, following the consummation of the Transactions, will continue to have significant indebtedness and liabilities. In addition, as of September 30, 2012, on an actual and a pro forma basis after giving effect to the Transactions, Georgia Gulf had and would have had outstanding long-term indebtedness and liabilities of $1.2 billion and $3.1 billion, respectively. Georgia Gulf also has and will continue to have the ability to incur a significant amount of additional debt. After the consummation of the Transactions, Georgia Gulf’s indebtedness could have important consequences, including but not limited to:

 

   

limiting its ability to invest operating cash flow in its operations due to debt service and other obligations;

 

   

limiting its ability to obtain additional debt or equity financing for working capital expenditures or other general corporate purposes;

 

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limiting its operational flexibility due to the covenants contained in its debt agreements;

 

   

requiring it to dispose of significant assets in order to satisfy its debt service and other obligations if it is not able to satisfy these obligations from cash from operations or other sources;

 

   

to the extent that Georgia Gulf’s debt is subject to floating interest rates, increasing Georgia Gulf’s vulnerability to fluctuations in market interest rates;

 

   

limiting Georgia Gulf’s ability to buy back Georgia Gulf common stock or pay cash dividends;

 

   

limiting its flexibility in planning for, or reacting to, changes in its business or industry, thereby limiting its ability to compete with companies that are not as highly leveraged; and

 

   

increasing its vulnerability to economic downturns and changing market conditions.

Georgia Gulf’s ability to satisfy its debt service and other obligations will depend on its future performance, which will be affected by financial, business, economic and other factors, including prices, industry capacity levels and demand for Georgia Gulf’s products, raw materials and energy costs and availability, feedstock availability and changes in governmental and environmental regulations. If Georgia Gulf does not generate enough cash to satisfy its debt service and other obligations, it may be required to refinance all or part of its existing debt, sell its assets, borrow more money or raise equity. There is no assurance that Georgia Gulf will be able to, at any given time, refinance its debt, sell its assets, borrow more money or raise capital on terms acceptable to it or at all.

Georgia Gulf will assume certain material pension and post-retirement welfare benefit obligations associated with the PPG Chlor-alkali and Derivatives Business. Future funding obligations related to these liabilities could restrict cash available for Georgia Gulf’s operations, capital expenditures or other requirements, or require Georgia Gulf to borrow additional funds.

In the Transactions, Georgia Gulf, through its wholly owned subsidiary Splitco, will assume certain substantial tax-qualified and non tax-qualified pension obligations related to employees and retirees of the PPG Chlor-alkali and Derivatives Business. In connection therewith, the legally required level of pension assets will be transferred from the tax-qualified PPG pension plans to the new pension plans to be established by Georgia Gulf in respect of those liabilities. In addition to the standard minimum funding requirements, the Pension Protection Act of 2006 (the “Pension Act”) (as amended by the Worker, Retiree and Employer Recovery Act of 2008) requires companies with tax-qualified defined benefit pension plans to make contributions to such plans as frequently as quarterly in order to meet the “funding target” for such plans, as defined in the Pension Act. The failure to meet the funding target could result in the imposition of fines or penalties. Funding obligations with respect to tax-qualified pension plans change due to, among other things, the actual investment return on plan assets. Continued volatility in the capital markets may have a further negative impact on the funded status of tax-qualified pension plans, which may in turn increase attendant funding obligations. The unfunded status of the pension obligations to be assumed by Georgia Gulf calculated on a projected benefit obligation basis as of December 31, 2011 was approximately $80 million, of which the unfunded non-qualified pension liabilities to be assumed by Georgia Gulf were calculated to be approximately $25 million as of December 31, 2011. The unfunded other post-retirement benefits obligations to be assumed by Georgia Gulf as of December 31, 2011 were approximately $177 million. Georgia Gulf estimates that it will fund approximately $20 million to $25 million to the assumed pension and other post retirement benefit plans for the year ended December 31, 2013. Given the amount of pension assets transferred from the tax-qualified PPG pension plans to the new pension plans to be established by Georgia Gulf, and subject to the foregoing variables, and the uncertainties associated therewith, it is possible that Georgia Gulf could be required to make substantial contributions in future years to the new pension plans. These contributions could restrict available cash for Georgia Gulf’s operations, capital expenditures and other requirements, and may materially adversely affect its financial condition and liquidity. Nonqualified pension liabilities to be assumed by Georgia Gulf are unfunded and no assets will be transferred by PPG to Georgia Gulf in respect of these liabilities. These obligations will require annual funding that could restrict cash available to Georgia Gulf for other purposes.

 

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The principal post-retirement welfare benefit liabilities to be assumed by Georgia Gulf related to retirees associated with the PPG Chlor-alkali and Derivatives Business are obligations to provide retiree health benefits. No assets will be transferred by PPG to Georgia Gulf in respect of these liabilities as these obligations are unfunded. The obligations to make payment with respect to these liabilities in the future may increase for several reasons, including, but not limited to, because of health care costs escalation. These obligations will require annual funding that could restrict cash available to Georgia Gulf for use for other purposes.

While Georgia Gulf intends to comply with any future funding obligations for its pension and post retirement welfare benefit plans through the use of cash from operations, there can be no assurance that Georgia Gulf will generate enough cash to do so and also meet its other required or intended cash uses. Georgia Gulf’s inability to fund these obligations through cash from operations could require it to seek funding from other sources, including through additional borrowings, which could materially increase Georgia Gulf’s outstanding debt or debt service requirements.

Sales of Georgia Gulf common stock after the Transactions may negatively affect the market price of Georgia Gulf common stock.

The shares of Georgia Gulf common stock to be issued in the Transactions to holders of Splitco common stock will generally be eligible for immediate resale. The market price of Georgia Gulf common stock could decline as a result of sales of a large number of shares of Georgia Gulf common stock in the market after the consummation of the Transactions or even the perception that these sales could occur.

It is expected that immediately after consummation of the Merger, pre-Merger holders of Splitco common stock will hold 50.5% of Georgia Gulf’s common stock and Georgia Gulf’s existing stockholders will hold 49.5% of Georgia Gulf’s common stock, subject to potential adjustment under limited circumstances as described in the section of this document entitled “The Merger Agreement—Merger Consideration.” Currently, PPG shareholders may include index funds that have performance tied to the Standard & Poor’s 500 Index or other stock indices, and institutional investors subject to various investing guidelines. Because Georgia Gulf may not be included in these indices following the consummation of the Transactions or may not meet the investing guidelines of some of these institutional investors, these index funds and institutional investors may decide to or may be required to sell the Georgia Gulf common stock that they receive in the Transactions. In addition, the investment fiduciaries of PPG’s defined contribution and defined benefit plans may decide to sell any Georgia Gulf common stock that the trusts for these plans receive in the Transactions, or may decide not to participate in the exchange offer, in response to their fiduciary obligations under applicable law. These sales, or the possibility that these sales may occur, may also make it more difficult for Georgia Gulf to obtain additional capital by selling equity securities in the future at a time and at a price that it deems appropriate.

The historical financial information of the PPG Chlor-alkali and Derivatives Business may not be representative of its results or financial condition if it had been operated independently of PPG and, as a result, may not be a reliable indicator of its future results.

The PPG Chlor-alkali and Derivatives Business is currently operated by PPG. Consequently, the financial information of the PPG Chlor-alkali and Derivatives Business included in this document has been derived from the consolidated financial statements and accounting records of the PPG Chlor-alkali and Derivatives Business and reflects all direct costs as well as assumptions and allocations made by management of PPG. The financial position, results of operations and cash flows of the PPG Chlor-alkali and Derivatives Business presented may be different from those that would have resulted had the PPG Chlor-alkali and Derivatives Business been operated independently of PPG during the applicable periods or at the applicable dates. For example, in preparing the financial statements of the PPG Chlor-alkali and Derivatives Business, PPG made allocations of costs and PPG corporate expenses deemed to be attributable to the PPG Chlor-alkali and Derivatives Business. However, these costs and expenses reflect the costs and expenses attributable to the PPG Chlor-alkali and Derivatives Business operated as part of a larger organization and do not necessarily reflect costs and expenses that would be incurred

 

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by the PPG Chlor-alkali and Derivatives Business had it been operated independently. As a result, the historical financial information of the PPG Chlor-alkali and Derivatives Business may not be a reliable indicator of future results.

Georgia Gulf may be unable to provide the same types and level of benefits, services and resources to the PPG Chlor-alkali and Derivatives Business that historically have been provided by PPG, or may be unable to provide them at the same cost.

As a separate reporting segment of PPG, the PPG Chlor-alkali and Derivatives Business has been able to receive benefits and services from PPG and has been able to benefit from PPG’s financial strength and extensive business relationships. After the Transactions, the PPG Chlor-alkali and Derivatives Business will be owned by Georgia Gulf and will no longer benefit from PPG’s resources. While Georgia Gulf expects to enter into an agreement under which PPG will agree to provide certain transition services for up to 24 months following the consummation of the Transactions, it cannot be assured that Georgia Gulf will be able to adequately replace those resources or replace them at the same cost. If Georgia Gulf is not able to replace the resources provided by PPG or is unable to replace them at the same cost or is delayed in replacing the resources provided by PPG, Georgia Gulf’s results of operations may be materially adversely impacted.

Georgia Gulf’s business, financial condition and results of operations may be adversely affected following the Transactions if Georgia Gulf cannot negotiate terms that are as favorable as those PPG has received when Georgia Gulf replaces contracts after the closing of the Transactions.

Prior to consummation of the Transactions, certain functions (such as purchasing, information systems, sales, logistics and distribution) for the PPG Chlor-alkali and Derivatives Business are generally being performed under PPG’s centralized systems and, in some cases, under contracts that are also used for PPG’s other businesses and which are not intended to be assigned to Georgia Gulf with the PPG Chlor-alkali and Derivatives Business. In addition, some other contracts that PPG is a party to on behalf of the PPG Chlor-alkali and Derivatives Business require consents of third parties to assign them to Splitco. While PPG, under the Transition Services Agreement, will agree to provide Georgia Gulf with certain services, there can be no assurance that Georgia Gulf will be able to obtain those consents or negotiate terms that are as favorable as those PPG received when and if Georgia Gulf replaces these services with its own agreements for similar services. Although Georgia Gulf believes that it will be able to obtain any such consents or enter into new agreements for similar services, it is possible that the failure to replace a significant number of these agreements for any of these services could have a material adverse impact on Georgia Gulf following the Transactions.

If the Distribution, including the Debt Exchange, does not qualify as a tax-free transaction under Section 368(a)(1)(D) or 355 of the Code or the Merger does not qualify as a tax-free “reorganization” under Section 368(a) of the Code, including as a result of actions taken in connection with the Distribution or the Merger or as a result of subsequent acquisitions of shares of PPG, Georgia Gulf or Splitco common stock, then PPG and/or PPG shareholders may be required to pay substantial U.S. federal income taxes, and, in certain circumstances, Splitco and Georgia Gulf may be required to indemnify PPG for any such tax liability.

The consummation of the Transactions is conditioned on PPG’s receipt of the Private Letter Ruling (as defined below in the section of this document entitled “This Exchange Offer—Material U.S. Federal Income Tax Consequences of the Distribution and the Merger—The Distribution”) (which has been obtained). The consummation of the Transactions is also conditioned on the receipt by PPG of the Distribution Tax Opinion and a Merger Tax Opinion, (as defined below in the section of this document entitled “This Exchange Offer—Material U.S. Federal Income Tax Consequences of the Distribution and the Merger” and “—The Merger”) and by Georgia Gulf of a Merger Tax Opinion.

Although a private letter ruling from the IRS generally is binding on the IRS, PPG and Splitco will not be able to rely on the Private Letter Ruling if the factual representations made to the IRS in connection with the

 

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request for the Private Letter Ruling are untrue or incomplete in any material respect, or if undertakings made to the IRS in connection with the request for the Private Letter Ruling have been violated. In addition, the opinions of counsel will be based on, among other things, the Private Letter Ruling as to the matters addressed by the ruling, current law and certain representations and assumptions as to factual matters made by PPG, Splitco, Georgia Gulf, and Merger Sub. Any change in currently applicable law, which may be retroactive, or the failure of any representation or assumption to be true, correct and complete in all material respects, could adversely affect the conclusions reached by counsel in the opinions. See “This Exchange Offer—Material U.S. Federal Income Tax Consequences of the Distribution and the Merger”.

Even if the Distribution were to otherwise to qualify as a tax-free transaction under Sections 368(a)(1)(D) and 355 of the Code, the Distribution would be taxable to PPG (but not to PPG shareholders) pursuant to Section 355(e) of the Code if there is a 50% or greater change in ownership of either PPG or Splitco (including stock of Georgia Gulf after the Merger), directly or indirectly, as part of a plan or series of related transactions that include the Distribution. For this purpose, any acquisitions of PPG, Splitco or Georgia Gulf stock within the period beginning two years before the Distribution and ending two years after the Distribution are presumed to be part of such a plan, although PPG, Splitco or Georgia Gulf may be able to rebut that presumption. Further, for purposes of this test, the Merger will be treated as part of such a plan, but the Merger standing alone should not cause the Distribution to be taxable to PPG under Section 355(e) of the Code because pre-Merger holders of Splitco common stock will hold at least 50.5% of Georgia Gulf common stock immediately following the Merger. However, if the IRS were to determine that other acquisitions of PPG, Splitco or Georgia Gulf stock, either before or after the Distribution, were part of a plan or series of related transactions that included the Distribution, such determination could result in significant tax to PPG. In connection with the Private Letter Ruling and the Distribution Tax Opinion, PPG and Georgia Gulf have represented or will represent that the Distribution is not part of any such plan or series of related transactions.

In certain circumstances, under the Tax Matters Agreement, Splitco is (and Georgia Gulf, if applicable, will be) required to indemnify PPG against any taxes on the Distribution that arise as a result of certain actions or failures to act by Georgia Gulf or Splitco, any event (or series of events) after the Transactions involving the stock or assets of Splitco, or any breach by Georgia Gulf or, after the Transactions, Splitco of any representation or covenant made by them in the Tax Matters Agreement (a “disqualifying action”). If PPG were to recognize gain on the Distribution for reasons not related to a disqualifying action by Splitco or Georgia Gulf, PPG would not be entitled to be indemnified under the Tax Matters Agreement and the resulting tax to PPG could have a material adverse effect on PPG. In addition, in certain circumstances, under the Tax Matters Agreement, Splitco is (and Georgia Gulf will be) required to indemnify PPG against taxes on the Merger that arise as a result of a disqualifying action by Splitco or Georgia Gulf. If PPG were to recognize gain on the Merger for reasons not related to a disqualifying action by Splitco or Georgia Gulf, PPG would generally not be entitled to indemnification by Splitco (or Georgia Gulf) under the Tax Matters Agreement. If Splitco (or Georgia Gulf, if applicable) is required to indemnify PPG if the Distribution or the Merger is taxable, this indemnification obligation would be substantial and could have a material adverse effect on Georgia Gulf, including with respect to its financial condition and results of operations.

Splitco and Georgia Gulf may be affected by significant restrictions following the Transactions in order to avoid significant tax-related liabilities.

The Tax Matters Agreement generally will prohibit Splitco, Georgia Gulf and their affiliates from taking certain actions that could cause the Distribution, the Merger and certain related transactions to fail to qualify as tax-free transactions. In particular, for a two-year period following the date of the Distribution, Splitco may not:

 

   

enter into any transaction or series of transactions (or any agreement, understanding or arrangement) as a result of which one or more persons would acquire (directly or indirectly) stock comprising 50% or more of the vote or value of Splitco (taking into account the stock of Splitco acquired pursuant to the Merger);

 

   

redeem or repurchase any stock or stock rights;

 

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amend its certificate of incorporation or take any other action affecting the relative voting rights of its capital stock;

 

   

merge or consolidate with any other person (other than pursuant to the Merger);

 

   

take any other action that would, when combined with any other direct or indirect changes in ownership of Splitco capital stock (including pursuant to the Merger), have the effect of causing one or more persons to acquire stock comprising 50% or more of the vote or value of Splitco, or would reasonably be expected to adversely affect the tax-free status of the Transactions;

 

   

liquidate or partially liquidate;

 

   

discontinue the active conduct of the PPG Chlor-alkali and Derivatives Business; or

 

   

sell, transfer or otherwise dispose of assets (including stock of subsidiaries) that constitute more than 30% of the consolidated gross assets of Splitco and/or its subsidiaries (subject to exceptions for, among other things, ordinary course dispositions and repayments or prepayments of Splitco debt).

If Splitco (or Georgia Gulf, if applicable) intends to take any such restricted action, Splitco (or Georgia Gulf, if applicable) will be required to cooperate with PPG in obtaining a supplemental IRS ruling or an unqualified tax opinion reasonably acceptable to PPG to the effect that such action will not affect the status of the Distribution, the Merger and certain related transactions as tax-free transactions. However, if Splitco (or Georgia Gulf, if applicable) takes any of the actions above and such actions result in tax-related losses to PPG, then Splitco (or Georgia Gulf, if applicable) generally will be required to indemnify PPG for such losses, without regard to whether PPG has given Splitco prior consent. See “Other Agreements—Tax Matters Agreement.”

Due to these restrictions and indemnification obligations under the Tax Matters Agreement, Georgia Gulf may be limited in its ability to pursue strategic transactions, equity or convertible debt financings or other transactions that may otherwise be in Georgia Gulf’s best interests. Also, Georgia Gulf’s potential indemnity obligation to PPG might discourage, delay or prevent a change of control during this two-year period that Georgia Gulf stockholders may consider favorable to its ability to pursue strategic transactions, equity or convertible debt financings, or other transactions that may otherwise be in Georgia Gulf’s best interests.

Georgia Gulf will have more shares of its common stock outstanding after the Transactions, which may discourage other companies from trying to acquire Georgia Gulf.

Georgia Gulf expects to issue approximately 35,236,010 million shares of its common stock as part of the Transactions. Because Georgia Gulf will be a significantly larger company and have significantly more shares of its common stock outstanding after the Transactions, an acquisition of Georgia Gulf may become more expensive. As a result, some companies may not seek to acquire Georgia Gulf, and the reduction in potential parties that may seek to acquire Georgia Gulf could negatively impact the prices at which Georgia Gulf’s common stock trades.

Tendering PPG shareholders may receive a reduced premium or may not receive any premium in this exchange offer.

This exchange offer is designed to permit you to exchange your shares of PPG common stock for shares of Splitco common stock at a 10% discount to the per-share value of Splitco common stock, calculated as set forth in this document. Stated another way, for each $1.00 of your PPG common stock accepted in this exchange offer, you will receive approximately $1.11 of Splitco common stock. The value of the PPG common stock will be based on the calculated per-share value for the PPG common stock on the NYSE and the value of the Splitco common stock will be based on the calculated per-share value of Georgia Gulf common stock on the NYSE, in each case determined by reference to the simple arithmetic average of the daily VWAP on each of the Valuation Dates.

 

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The number of shares you can receive is, however, subject to an upper limit of 3.9745 shares of Splitco common stock for each share of PPG common stock accepted in this exchange offer. As a result, you may receive less than $1.11 of Splitco common stock for each $1.00 of PPG common stock, depending on the calculated per-share values of PPG common stock and Splitco common stock at the expiration date. Because of the limit on the number of shares of Splitco common stock you may receive in this exchange offer, if there is a drop of sufficient magnitude in the trading price of Georgia Gulf common stock relative to the trading price of PPG common stock, or if there is an increase of sufficient magnitude in the trading price of PPG common stock relative to the trading price of Georgia Gulf common stock, you may not receive $1.11 of Splitco common stock for each $1.00 of PPG common stock, and could receive much less.

For example, if the calculated per-share value of PPG common stock was $135.24 (the highest closing price for PPG common stock on the NYSE during the three–month period prior to commencement of this exchange offer) and the calculated per-share value of Splitco common stock was $35.39 (the lowest closing price for Georgia Gulf common stock on the NYSE during that three–month period), the value of Splitco common stock, based on the Georgia Gulf common stock price, received for PPG common stock accepted for exchange would be approximately $1.04 for each $1.00 of PPG common stock accepted for exchange.

This exchange offer does not provide for a minimum exchange ratio. See “This Exchange Offer—Terms of this Exchange Offer.” If the upper limit on the number of shares of Splitco common stock that can be received for each share of PPG common stock tendered is in effect at the expiration of the exchange offer period, then the exchange ratio will be fixed at the upper limit and a Mandatory Extension of this exchange offer will be made until 8:00 a.m., New York City time, on the day after the second trading day following the last trading day prior to the originally contemplated expiration date to permit shareholders to validly tender or properly withdraw their PPG common stock during those days. Any changes in the prices of PPG common stock or Georgia Gulf common stock on those additional days of this exchange offer will not, however, affect the exchange ratio.

For example, if the trading price of PPG common stock were to increase during the last two trading days of the exchange offer, the average PPG stock price used to calculate the exchange ratio would likely be lower than the closing price of shares of PPG common stock on the expiration date of the exchange offer. As a result, you may receive fewer shares of Splitco common stock, and therefore effectively fewer shares of Georgia Gulf common stock, for each $1.00 of shares of PPG common stock than you would have if the average PPG stock price were calculated on the basis of the closing price of shares of PPG common stock on the expiration date of the exchange offer or on the basis of an averaging period that includes the last two trading days prior to the expiration of the exchange offer period. Similarly, if the trading price of Georgia Gulf common shares were to decrease during the last two trading days prior to the expiration of the exchange offer period, the average Georgia Gulf stock price used to calculate the exchange ratio would likely be higher than the closing price of Georgia Gulf common shares on the expiration date. This could also result in your receiving fewer shares of Splitco common stock, and therefore effectively fewer shares of Georgia Gulf common stock, for each $1.00 of PPG common stock than you would otherwise receive if the average Georgia Gulf common stock price were calculated on the basis of the closing price of Georgia Gulf common stock on the expiration date or on the basis of an averaging period that included the last two trading days prior to the expiration of the exchange offer period.

In addition, there is no assurance that holders of shares of PPG common stock that are exchanged for Splitco common stock in this exchange offer will be able to sell the shares of Georgia Gulf common stock after receipt in the Merger at prices comparable to the calculated per-share value of Splitco common stock at the expiration date.

The trading prices of Georgia Gulf common stock may not be an appropriate proxy for the prices of Splitco common stock.

The calculated per-share value for Splitco common stock is based on the trading prices for Georgia Gulf common stock, which may not be an appropriate proxy for the prices of Splitco common stock. There is currently no trading market for Splitco common stock and no such market will be established in the future. PPG believes,

 

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however, that the trading prices for Georgia Gulf common stock are an appropriate proxy for the trading prices of Splitco common stock because immediately following the consummation of this exchange offer, Merger Sub will be merged with and into Splitco, whereby Splitco will continue as the surviving company and a wholly-owned subsidiary of Georgia Gulf. Each outstanding share of Splitco common stock will be canceled and retired and will cease to exist and the holders of Splitco common stock will receive the right to receive a number of shares of common stock of Georgia Gulf equal to (a) the greater of (i) 35,200,000 shares of Georgia Gulf common stock or (ii) the product of (x) the number of shares of Georgia Gulf common stock issued and outstanding immediately prior to the effective time of the Merger multiplied by (y) 1.02020202, divided by (b) the number of shares of Splitco common stock issued and outstanding immediately prior to the effective time of the Merger. In addition, Splitco will authorize the issuance of a number of shares of Splitco common stock such that the total number of shares of Splitco common stock outstanding immediately prior to the Merger will be that number that results in the exchange ratio in the Merger equaling one and, as a result, each share of Splitco common stock (except shares of Splitco common stock held by Splitco as treasury stock) will be converted into one share of Georgia Gulf common stock in the Merger. There can be no assurance, however, that common stock of Georgia Gulf after the issuance of Splitco common stock and the Merger will trade on the same basis as Georgia Gulf common stock trades prior to the Transactions. In addition, it is possible that the trading prices of Georgia Gulf common stock prior to consummation of the Merger will not fully reflect the anticipated value of common stock of Georgia Gulf after the Merger. For example, trading prices of Georgia Gulf common stock on the Valuation Dates could reflect some uncertainty as to the timing or consummation of the Merger or could reflect trading activity by investors seeking to profit from market arbitrage.

Following the exchange of shares of Georgia Gulf common stock for shares of Splitco common stock in the Merger, the former holders of shares of Splitco common stock may experience a delay prior to receiving their shares of Georgia Gulf common stock or their cash in lieu of fractional shares, if any.

Following the exchange of shares of Georgia Gulf common stock for shares of Splitco common stock, the former holders of Splitco common stock will receive their shares of Georgia Gulf common stock or their cash in lieu of fractional shares, if any, only upon surrender of all necessary documents, duly executed, to the transfer agent. Although Georgia Gulf has been informed by NYSE that it expects to create a “when issued” market for the new shares of Georgia Gulf common stock issuable to PPG shareholders whose shares of PPG common stock are accepted in the exchange offer, the creation of a “when issued” market is outside the control of Georgia Gulf, and there can be no assurance that such a market will develop. Until the distribution of the shares of Georgia Gulf common stock to the individual shareholder has been completed, the relevant holder of shares of Georgia Gulf common stock will not be able to sell its shares of Georgia Gulf common stock. Consequently, in case the market price for Georgia Gulf common stock should decrease during that period, the relevant shareholder would not be able to stop any losses by selling the shares of Georgia Gulf common stock. Similarly, the former holders of Splitco common stock who received cash in lieu of fractional shares will not be able to invest the cash until the distribution to the relevant shareholder has been completed, and they will not receive interest payments for this time period.

Other Risks that Relate to Georgia Gulf, Including the PPG Chlor-alkali and Derivatives Business After the Transactions

The chemicals industry is cyclical, seasonal and volatile, experiencing alternating periods of tight supply and overcapacity, and the building products industry is also cyclical and seasonal. This cyclicality adversely impacts Georgia Gulf’s capacity utilization and causes fluctuations in Georgia Gulf’s results of operations.

Georgia Gulf’s historical operating results for its chemical businesses have tended to reflect the cyclical and volatile nature of the chemicals industry. Georgia Gulf expects to continue to be subject to the cyclicality and volatility following the consummation of the Transactions. Historically, periods of tight supply of commodity chemicals have resulted in increased prices and profit margins thereon, and have been followed by periods of substantial capacity increase, resulting in oversupply and declining prices and profit margins for those products.

 

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A number of Georgia Gulf’s chemical products are and will remain highly dependent on markets that are particularly cyclical, such as the building and construction, paper and pulp, and automotive markets. The chlor-alkali industry is also cyclical, both as a result of changes in demand for each of chlorine and caustic soda and as a result of changes in manufacturing capacity, and prices for both products respond rapidly to changes in supply and demand conditions in the industry. The chlor-alkali industry experiences its highest level of activity during the spring and summer months. The first and fourth quarter demand in the chlor-alkali industry usually reflects a decrease in construction and water treatment activity due mainly to weather patterns in those periods. As a result of changes in demand for Georgia Gulf’s products, its operating rates and earnings fluctuate significantly, not only from year to year, but also from quarter to quarter, depending on factors such as feedstock costs, transportation costs, and supply and demand for the product produced at the facility during that period. In order to compensate for changes in demand, Georgia Gulf has historically operated individual facilities below or above rated capacities in any period, and Georgia Gulf expects to continue this practice in the future. Georgia Gulf may idle a facility for an extended period of time because an oversupply of a certain product or a lack of demand for that product makes production uneconomical. Facility shutdown and subsequent restart expenses may adversely affect periodic results when these events occur. In addition, a temporary shutdown may become permanent, resulting in a write-down or write-off of the related assets. Industry-wide capacity expansions or the announcement of such expansions have generally led to a decline in the pricing of Georgia Gulf’s chemical products in the affected product line. Following the completion of the Transactions, Georgia Gulf expects that it may be required to take similar actions in the future in response to cyclical conditions. Georgia Gulf cannot provide any assurances that future growth in product demand will be sufficient to utilize any additional capacity.

In addition, the cyclical and seasonal nature of the building products industry, which is significantly affected by changes in national and local economic and other conditions such as employment levels, demographic trends, availability of financing, interest rates and consumer confidence, could negatively affect the demand for and pricing of Georgia Gulf’s building products. For example, if interest rates increase, the ability of prospective buyers to finance purchases of home improvement products and invest in new real estate could be adversely affected, which, in turn, could adversely affect Georgia Gulf’s financial performance. In response to the significant decline in the market for Georgia Gulf’s building and home improvement products beginning in 2008, Georgia Gulf has closed facilities and sold certain businesses and assets and continues to monitor cost control initiatives. In the near-term, it is unclear whether demand for these products will return and stabilize or whether demand for Georgia Gulf’s building products will further decline.

The integration of Georgia Gulf and the PPG Chlor-alkali and Derivatives Businesses may not be successful or the anticipated benefits from the Transactions may not be realized.

After consummation of the Transactions, Georgia Gulf will have significantly more sales, assets and employees than it did prior to the Transactions. The integration process will require Georgia Gulf to expend significant capital and significantly expand the scope of its operations and financial systems. Georgia Gulf’s management will be required to devote a significant amount of time and attention to the process of integrating the operations of Georgia Gulf’s business and the PPG Chlor-alkali and Derivatives Business. There is a significant degree of difficulty and management involvement inherent in that process. These difficulties include:

 

   

integrating the operations of the PPG Chlor-alkali and Derivatives Business while carrying on the ongoing operations of Georgia Gulf’s business;

 

   

managing a significantly larger company than before consummation of the Transactions;

 

   

the possibility of faulty assumptions underlying Georgia Gulf’s expectations regarding the integration process;

 

   

coordinating a greater number of diverse businesses and businesses located in a greater number of geographic locations;

 

   

integrating two separate business cultures, which may prove to be incompatible;

 

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attracting and retaining the necessary personnel associated with the PPG Chlor-alkali and Derivatives Business following the Transactions;

 

   

creating uniform standards, controls, procedures, policies and information systems and controlling the costs associated with such matters; and

 

   

integrating information, purchasing, accounting, finance, sales, billing, payroll and regulatory compliance systems.

There is no assurance that the PPG Chlor-alkali and Derivatives Business will be successfully or cost-effectively integrated into Georgia Gulf. The process of integrating the PPG Chlor-alkali and Derivatives Business into Georgia Gulf’s operations may cause an interruption of, or loss of momentum in, the activities of Georgia Gulf’s business after consummation of the Transactions. If Georgia Gulf management is not able to effectively manage the integration process, or if any significant business activities are interrupted as a result of the integration process, Georgia Gulf’s business could suffer and its liquidity, results of operations and financial condition may be materially adversely impacted.

All of the risks associated with the integration process could be exacerbated by the fact that Georgia Gulf may not have a sufficient number of employees with the requisite expertise to integrate the businesses or to operate Georgia Gulf’s business after the Transactions. If Georgia Gulf does not hire or retain employees with the requisite skills and knowledge to run Georgia Gulf after the Transactions, it may have a material adverse effect on Georgia Gulf’s business.

Even if Georgia Gulf is able to successfully combine the two business operations, it may not be possible to realize the full benefits of the increased sales volume and other benefits, including the expected synergies, that are expected to result from the Transactions, or realize these benefits within the time frame that is expected. For example, the elimination of duplicative costs may not be possible or may take longer than anticipated, or the benefits from the Transactions may be offset by costs incurred or delays in integrating the companies. If Georgia Gulf fails to realize the benefits it anticipates from the acquisition, Georgia Gulf’s liquidity, results of operations or financial condition may be adversely affected.

Georgia Gulf’s operations and assets are and will continue to be subject to extensive environmental, health and safety laws and regulations; the costs associated with compliance with these regulations could materially adversely affect Georgia Gulf’s financial condition and results of operations, and the failure to comply could expose Georgia Gulf to material liabilities.

Georgia Gulf’s operations and assets are, and are expected to continue to be, subject to extensive environmental, health and safety regulation, including laws and regulations related to air emissions, water discharges, waste disposal and remediation of contaminated sites, at both the national and local levels in the U.S. Georgia Gulf is also subject to similar laws and regulations in Canada and, after consummation of the Transactions, expects to be subject to similar regulations in other jurisdictions. The nature of the chemical and building products industries exposes, and is expected to continue to expose, Georgia Gulf to risks of liability under these laws and regulations due to the production, storage, use, transportation and sale of materials that can cause contamination or personal injury, including, in the case of commodity chemicals, potential releases into the environment. Environmental laws may have a significant effect on the costs of use, transportation and storage of raw materials and finished products, as well as the costs of the storage and disposal of wastes. Georgia Gulf has and will continue to incur substantial operating and capital costs to comply with environmental laws and regulations. In addition, Georgia Gulf may incur substantial costs, including fines, damages, criminal or civil sanctions and remediation costs, or experience interruptions in its operations for violations arising under these laws and regulations.

For example, some environmental laws, such as the federal Superfund statute, impose joint and several liability for the cost of investigations and remedial actions on any company that generated, arranged for disposal

 

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of or transported waste to a disposal site, or selected or presently or formerly owned or operated a disposal site or a site otherwise contaminated by hazardous substances. A number of environmental liabilities have been associated with Georgia Gulf’s facilities at Lake Charles, Louisiana that Georgia Gulf acquired as part of its acquisition of the vinyls business of CONDEA Vista Company (“CONDEA Vista,” which is now known as Sasol North America, Inc.) and which may be designated as Superfund sites. Although CONDEA Vista retained financial responsibility for certain environmental liabilities that relate to the acquired facilities that arose before the closing of the acquisition in November 1999, there can be no assurance that CONDEA Vista will be able to satisfy its obligations in this regard, particularly in light of the long period of time in which environmental liabilities may arise under the environmental laws. If CONDEA Vista fails to fulfill its obligations regarding these environmental liabilities, then Georgia Gulf could be held responsible. Furthermore, Georgia Gulf severally is responsible for, and does not have indemnification for, any environmental liabilities arising from certain other acquisitions, including several liabilities resulting from Royal Group’s operations prior to Georgia Gulf’s acquisition of that company.

In connection with the consummation of the Transactions, Georgia Gulf will acquire a significant additional number of properties and amount of assets, which could materially increase Georgia Gulf’s compliance costs and exposure to liabilities. The properties and assets associated with the PPG Chlor-alkali and Derivatives Business are subject to similar environmental health and safety laws and regulations, as are the properties and assets of Georgia Gulf, which could require or result in significant additional capital expenditures in future periods. For example, the PPG Chlor-alkali and Derivatives Business could be responsible for, and is engaged in discussing with various parties regarding an allocation of costs relating to certain environmental remediation plans at the Calcasieu River Estuary in Lake Charles, Louisiana. These costs could be material and, if incurred, would be expected to be incurred following the consummation of the Transactions. Further, PPG has recently settled with the Louisiana Department of Environmental Quality alleged violations of PPG’s Lake Charles facility’s air permit relating to the PPG Chlor-alkali and Derivatives Business. The settlement calls for a cash payment of $400,000 and the performance of Beneficial Environmental Projects expected to cost $220,000. In connection with the Transactions, this settlement is a liability of the PPG Chlor-alkali and Derivatives Business.

Separately, the PPG Chlor-alkali and Derivatives Business’s facility in Natrium, West Virginia is subject to a number of environmental uncertainties. This facility discharges wastewater into the Ohio River pursuant to a permit issued by the West Virginia Department of Environmental Protection. Because it discharges into the Ohio River, this facility’s permit terms must conform to pollution control standards for the Ohio River set by the Ohio River Valley Water Sanitation Commission (“ORSANCO”). ORSANCO has adopted certain pollution control standards that prohibit, as of October 16, 2013, the use of a “mixing zone” as used by, among others, the PPG Chlor-alkali and Derivatives Business, to meet certain water quality standards. PPG, on behalf of the PPG Chlor-alkali and Derivatives Business, submitted a request for a variance from this prohibition and to allow for the continued use of a mixing zone for mercury for the life of the permit, and for any subsequent permits. On October 12, 2012, ORSANCO granted PPG’s request for a variance which will allow the PPG Chlor-alkali and Derivatives Business to continue to have a mixing zone for its discharge of mercury for a five-year period after ORSANCO’s prohibition on mixing zones takes effect on October 16, 2013. In addition, this facility operates a coal-fired power plant that it is currently anticipated may require capital expenditures in the range of $15-30 million in order to remain in compliance with the requirements of certain final regulations expected to be issued by the United States Environmental Protection Agency (the “EPA”) in 2012 relating to emissions standards for large and small boilers and incinerators that burn solid waste, known as Boiler maximum achievable control technology (“MACT”) regulations. No assurances as to the timing or content of the Boiler MACT regulations can be provided, and any final regulations may require the incurrence of significant additional costs beyond those currently anticipated.

As of September 30, 2012, the PPG Chlor-alkali and Derivatives Business had reserves for environmental contingencies totaling $33 million of which $5 million was classified as a current liability.

 

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For additional information on the potential environmental liabilities associated with the properties and assets of the PPG Chlor-alkali and Derivatives Business, including the expected timing and costs of actions related thereto, see the section of this document entitled “Information on the PPG Chlor-alkali and Derivatives Business—Regulation and Environmental Matters” and “—Legal Proceedings.”

In addition, due to the nature of environmental laws, regulations and liabilities, it is possible that the reviews Georgia Gulf conducted in connection with its evaluation of, and determination to enter into, the Transactions, may not have identified all potentially adverse conditions. Such conditions may not presently exist or be detectable through reasonable methods, or may not be able to be adequately valued. For example, the PPG Chlor-alkali and Chemical Business’s facility in Natrium, West Virginia has been in operation for over 65 years. There may be significant latent liabilities or future claims arising from the operation of a facility of this age, and Georgia Gulf may be required to incur material future remediation or other costs in connection with future actions or developments at this or other facilities.

Georgia Gulf expects to be continually subjected to increasingly stringent environmental and health and safety laws and regulations and that continued compliance will require increased capital expenditures and increased operating costs, or may impose restrictions on Georgia Gulf’s present or future operations. It is difficult to predict the future interpretation and development of these laws and regulations or their impact on Georgia Gulf’s future earnings and operations. Georgia Gulf’s policy is to accrue costs relating to environmental matters when it is probable that these costs will be required and can be reasonably estimated. Any increase in these costs, or any material restrictions, could materially adversely affect Georgia Gulf’s liquidity, financial condition and results of operations. However, estimated costs for future environmental compliance and remediation may be materially lower than actual costs, or Georgia Gulf may not be able to quantify potential costs in advance. Actual costs related to any environmental compliance in excess of estimated costs could have a material adverse effect on Georgia Gulf’s financial condition in one or more future periods.

Recent heightened interest in environmental-related issues could require Georgia Gulf to incur significant compliance costs or result in material operating restrictions.

Heightened interest in environmental regulation, such as climate change issues, have the potential to materially impact Georgia Gulf’s costs and present and future operations. Georgia Gulf, and other chemicals companies, are currently required to file certain governmental reports relating to greenhouse gas (“GHG”) emissions. The U.S. Government has considered, and may in the future implement, restrictions or other controls on GHG emissions which could require Georgia Gulf, including, following the consummation of the Merger, the PPG Chlor-alkali and Derivatives Business, to incur significant capital expenditures or further restrict Georgia Gulf’s present or future operations.

In addition to GHG regulations, the EPA has recently taken certain actions to limit or control certain pollutants created by companies such as Georgia Gulf and the PPG Chlor-alkali and Derivatives Business. For example, in February 2012, the EPA issued its final rule to update emissions limits for air toxins from polyvinyl chloride and copolymers production (“PVC production”). The rule, known as the National Emission Standards for Hazardous Air Pollutants for Polyvinyl Chloride and Copolymers Production, establishes new, more stringent emission standards for certain regulated “hazardous air pollutants,” including vinyl chloride monomer. The rule sets MACT standards for major sources of PVC production and establishes certain working practices, as well as monitoring, reporting and record-keeping requirements. Existing sources that become subject to these requirements would have three years from the effectiveness of the rule to come into compliance. Following the publication of the rule in the Federal Register, legal challenges were filed by the vinyl industry’s trade organization, several vinyl manufacturers, and several environmental groups, which will likely impact provisions of a final rule. Although Georgia Gulf has conducted a preliminary evaluation of the potential impact of a final rule on its operations, the preliminary evaluation was based on the final rule as it currently exists, as well as a number of assumptions concerning the equipment and process changes that would be necessary to come into compliance with the existing final rule. There could be significant changes from the currently existing rule to the final rule after all legal challenges have been exhausted.

 

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Following the consummation of the Transactions, Georgia Gulf expects that its business and operations will also be subject to pending environmental regulations impacting the PPG Chlor-alkali and Derivatives Business. For example, in March 2011, the EPA proposed amendments to the national emission standards for hazardous air pollutants for mercury emissions from mercury cell chlor-alkali plants known as the Mercury MACT regulations. These proposed amendments would require improvements in work practices to reduce fugitive emissions and would result in reduced levels of mercury emissions while still allowing the mercury cell facilities to continue to operate. The PPG Chlor-alkali and Derivatives Business currently operates a cell production unit at its Natrium, West Virginia facility, which constitutes approximately 4% of the PPG Chemical Business’s total chlor-alkali production capacity. No assurances as to the timing or content of the final rule, or its ultimate impact on Georgia Gulf, can be provided.

Separately, the PPG Chlor-alkali and Derivatives Business’s Natrium, West Virginia facility currently discharges wastewater into the Ohio River pursuant to a National Pollution Discharge Elimination System (“NPDES”) permit issued by the West Virginia Department of Environmental Protection (“WVDEP”). Because it discharges into the Ohio River, the wastewater permit terms must conform to pollution control standards for the Ohio River set by ORSANCO. ORSANCO has adopted an ambient water column standard criterion for mercury in the Ohio River and, in 2009, ORSANCO adopted certain pollution control standards that prohibit as of October 16, 2013, the use of a “mixing zone” as used by, among others, the PPG Chlor-alkali and Derivatives Business, to meet these standards for certain bioaccumulative chemicals, including mercury. In September 2011, PPG, on behalf of the PPG Chlor-alkali and Derivatives Business, submitted a request for a variance from the mixing zone prohibition in ORSANCO’s pollution control standards. PPG, on behalf of the PPG Chlor-alkali and Derivatives Business, requested continued use of a mixing zone for mercury through the life of its current permit, which is valid through January 2014, and for any subsequent permits. On October 12, 2012, ORSANCO granted PPG’s request for a variance which will allow the PPG Chlor-alkali and Derivatives Business to continue to have a mixing zone for its discharge of mercury for a five-year period after ORSANCO’s prohibition on mixing zones takes effect on October 16, 2013.

Also in March 2011, the EPA issued emissions standards for large and small boilers and incinerators that burn solid waste, known as the Boiler MACT regulations. These regulations are aimed at controlling emissions of toxic air contaminants. As a result of numerous petitions from both industry and environmental groups, the EPA reconsidered its March 2011 final rule. On December 23, 2011, the EPA’s proposed rule reconsidering its March 2011 final rule was published in the Federal Register. The EPA has indicated its intent to issue the final regulations in 2012 requiring that covered facilities achieve compliance within three years. The 115 megawatt coal fired power plant at the PPG Chlor-alkali and Derivatives Business’s Natrium, West Virginia facility would be the source most significantly impacted by the Boiler MACT regulations. The PPG Chlor-alkali and Derivatives Business continues to evaluate alternative paths of either retrofitting the Natrium boilers to burn natural gas or to engineer and install pollution control equipment. No assurances as to the timing or content of the final rule, or its ultimate impact on Georgia Gulf, can be provided.

The potential impact of these and/or unrelated future, legislative or regulatory actions on Georgia Gulf’s current or future operations cannot be predicted at this time but could be significant. Such impacts could include the potential for significant compliance costs, including capital expenditures, could result in operating restrictions or could require Georgia Gulf to incur significant legal or other costs related to compliance or other activities. Any increase in the costs related to these initiatives, or restrictions on Georgia Gulf’s operations, could materially adversely affect Georgia Gulf’s liquidity, financial condition or results of operations.

Natural gas, electricity, fuel and raw materials costs, and other external factors beyond Georgia Gulf’s control, as well as changes in the level of activity in the home repair and remodeling and new home construction sectors of the economy, can cause wide fluctuations in Georgia Gulf’s margins.

The cost of Georgia Gulf’s natural gas, electricity, fuel and raw materials may not correlate with changes in the prices Georgia Gulf receives for its products, either in the direction of the price change or in absolute

 

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magnitude. Natural gas and raw materials costs represent, and will continue to represent, a substantial part of Georgia Gulf’s and the PPG Chlor-alkali and Derivatives Business’s manufacturing costs, and energy costs, in particular electricity and fuel, represent a component of the costs to manufacture building products. Following the consummation of the Merger, a $1.00 change in the price of natural gas per British Thermal Unit (“BTU”) could raise or lower Georgia Gulf’s operating costs by approximately $60 million to $80 million per year. Most of the raw materials Georgia Gulf uses are commodities and the price of each can fluctuate widely for a variety of reasons, including changes in availability because of capacity additions or facility operating problems. For example, ethylene is a key raw material used by both Georgia Gulf and the PPG Chlor-alkali and Derivatives Business. During 2011, costs for ethylene increased substantially compared to 2010 driven by a combination of tight supplies due to production outages and increased global demand, particularly in U.S. exports of ethylene derivative products. Other external factors beyond Georgia Gulf’s control can cause volatility in raw materials prices, demand for Georgia Gulf’s products, product prices, sales volumes and margins. These factors include general economic conditions, the level of business activity in the industries that use Georgia Gulf’s products, competitors’ actions, international events and circumstances, and governmental regulation in the United States and abroad. These factors can also magnify the impact of economic cycles on Georgia Gulf’s business. While Georgia Gulf attempts to pass through price increases in energy costs and raw materials, Georgia Gulf has been unsuccessful in doing so in some circumstances in the past and there can be no assurance that it will be able to successfully do so in the future.

Additionally, Georgia Gulf’s business is and will continue to be impacted by changes in the North American home repair and remodeling sectors, as well as the new construction sector, which may be significantly affected by changes in economic and other conditions such as gross domestic product levels, employment levels, demographic trends, consumer confidence, increases in interest rates and availability of consumer financing for home repair and remodeling projects as well as availability of financing for new home purchases. These factors can lower the demand for and pricing of Georgia Gulf’s products, while Georgia Gulf may not be able to reduce its costs by an equivalent amount, which alone or in combination could cause Georgia Gulf’s net sales and net income to materially decrease and, among other things, could require Georgia Gulf to recognize impairments of its assets.

Hazards associated with manufacturing may adversely affect Georgia Gulf’s business or results of operations.

There are a number of hazards associated with chemical manufacturing and building products manufacturing in Georgia Gulf’s current operations, as well as in the use, storage and transportation of related raw materials, products and wastes. These hazards will be magnified in connection with the expansion of Georgia Gulf’s operations as a result of the consummation of the Transactions. The occurrence of any such hazard could lead to an interruption or suspension of operations and have a material adverse effect on the productivity and profitability of a particular manufacturing facility or on Georgia Gulf’s operations as a whole. These hazards include:

 

   

pipeline and storage tank leaks and ruptures;

 

   

explosions and fires;

 

   

inclement weather and natural disasters;

 

   

mechanical failure;

 

   

unscheduled downtime;

 

   

labor difficulties;

 

   

transportation interruptions;

 

   

transportation accidents involving the chemical products of Georgia Gulf and the PPG Chlor-alkali and Derivatives Business;

 

   

remediation complications;

 

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terrorist acts; and

 

   

chemical spills and other discharges or releases of toxic or hazardous substances or gases.

These hazards may cause personal injury and loss of life, severe damage to or destruction of property and equipment, and environmental damage, any of which could lead to claims or material liability under environmental or other laws. Although Georgia Gulf maintains property, business interruption and casualty insurance of the types and in the amounts that it believes are customary for the industry, Georgia Gulf is not fully insured against all potential hazards incident to its business.

In addition to potential exposure to claims arising from environmental liabilities, Georgia Gulf faces potential exposure to significant product liability, personal injury or other claims relating to the production and manufacture of its products, and this exposure will increase following the completion of the Merger.

Georgia Gulf is exposed to significant losses from product liability claims relating to the products it manufactures in both its chemicals and building products business. Additionally, individuals could seek damages for alleged personal injury or property damage due to exposure to chemicals at Georgia Gulf’s facilities or to chemicals otherwise owned, controlled or manufactured by Georgia Gulf. Georgia Gulf is also subject to present and future claims with respect to workplace exposure, workers’ compensation and other matters. In connection with the completion of the Transactions, Georgia Gulf expects that its exposure to potential losses from products liability, personal injury and other claims will significantly increase as a result of existing and possible future lawsuits and claims relating to the PPG Chlor-alkali and Derivatives Business and its products. For example, the PPG Chlor-alkali and Derivatives Business is currently involved in litigation with, among others, the City of Modesto, California relating to the claims involving the manufacture of perchloroethylene, and a significant number of other contract, product liability and other matters. Any such claims, whether with or without merit, could be time consuming, expensive to defend and could divert management’s attention and resources. Although Georgia Gulf maintains and expects to continue to maintain appropriate amounts of insurance for products liability, workplace exposure, workers’ compensation and other claims, the amount and scope of such insurance may not be adequate or available to cover a claim that is successfully asserted against Georgia Gulf. In addition, such insurance could become more expensive and difficult to maintain and, in the future, may not be available to Georgia Gulf on commercially reasonable terms or at all. The results of any future litigation or claims are inherently unpredictable, but such outcomes could have a material adverse effect on Georgia Gulf’s liquidity, financial condition or results of operations.

The ABL Revolver, the indenture governing Georgia Gulf’s 9 percent notes and the financing agreements expected to be entered into in connection with the Transactions will impose significant operating and financial restrictions on Georgia Gulf and its subsidiaries, which may prevent Georgia Gulf from capitalizing on business opportunities and taking some actions.

The agreements that govern the terms of Georgia Gulf’s existing debt, including the ABL Revolver and the indenture that governs the 9 percent notes, impose significant operating and financial restrictions on Georgia Gulf. In addition, Georgia Gulf expects that the financing agreements to be entered into in connection with the Transactions and described in the section of this document entitled “Debt Financing” will contain similar restrictions. These restrictions limit, and will continue to limit, Georgia Gulf’s ability to, among other things:

 

   

incur additional indebtedness;

 

   

incur liens;

 

   

make investments and sell assets, including the stock of subsidiaries;

 

   

pay dividends and make other distributions;

 

   

purchase its stock;

 

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engage in business activities unrelated to its current business;

 

   

enter into transactions with affiliates; or

 

   

consolidate, merge or sell all or substantially all of its assets.

As a result of these covenants and restrictions, in addition to any restrictions or limitations imposed on Georgia Gulf in connection with undertaking the Transactions and preserving the tax-free nature thereof, Georgia Gulf is limited in how it conducts its business and it may be unable to raise additional debt or equity financing to compete effectively or to take advantage of new business opportunities. The terms of any future indebtedness Georgia Gulf may incur could include more restrictive covenants. A breach of any of these covenants could result in a default in respect of the related indebtedness. If a default occurs, the relevant lenders could elect to declare the indebtedness, together with accrued interest and other fees, to be due and payable immediately and proceed against any collateral securing that indebtedness.

Furthermore, there are limitations on Georgia Gulf’s ability to borrow the full amount of commitments under the ABL Revolver, and Georgia Gulf expects that the New ABL Revolver (as defined below) will contain similar limitations. Borrowings under the ABL Revolver are limited by, and borrowings under the New ABL Revolver are expected to be limited by, a specified borrowing base consisting of a percentage of eligible accounts receivable and inventory, less customary reserves. In addition, (x) if Georgia Gulf’s availability under the ABL Revolver falls below a certain amount, Georgia Gulf will be subject to compliance with a covenant requiring Georgia Gulf to maintain a fixed charge coverage ratio of at least 1.1 to 1.0, and Georgia Gulf expects that the New ABL Revolver will contain a similar restrictive covenant, and (y) Georgia Gulf will be subject to a senior secured leverage ratio of 3.50 to 1.00 under the Term Facility. Georgia Gulf’s ability to comply with any required fixed charge coverage ratio and senior secured leverage ratio can be affected by events beyond its control, and Georgia Gulf cannot assure you it will be able to comply with these ratios. A breach of the covenants requiring compliance with these ratios, or with any other covenants in these debt agreements, could result in a default under the ABL Revolver, or under the New ABL Revolver or the Term Facility, when entered into, as the case may be.

Georgia Gulf relies, and expects to continue to rely after the consummation of the Merger, on a limited number of outside suppliers for specified feedstocks and services.

Georgia Gulf currently obtains, and expects to continue to obtain after the consummation of the Merger, a significant portion of its raw materials from a few key suppliers. If any of these suppliers are unable to meet their obligations under present or any future supply agreements, Georgia Gulf may be forced to pay higher prices to obtain the necessary raw materials. Any interruption of supply or any price increase of raw materials could have a material adverse effect on Georgia Gulf’s business and results of operations. In connection with Georgia Gulf’s acquisition of the vinyls business of CONDEA Vista in 1999, Georgia Gulf entered into agreements with CONDEA Vista to provide specified feedstocks for its Lake Charles facility. This facility is dependent upon CONDEA Vista’s infrastructure for services such as wastewater and ground water treatment, site remediation, and fire water supply. Any failure of CONDEA Vista to perform its obligations under those agreements could adversely affect the operation of the affected facilities and Georgia Gulf’s liquidity and results of operations. The agreements relating to these feedstocks and services had initial terms of one to ten years. Most of these agreements have been automatically renewed, but may be terminated by CONDEA Vista after specified notice periods. If Georgia Gulf was required to obtain an alternate source for these feedstocks or services, Georgia Gulf may not be able to obtain pricing on as favorable terms. Additionally, Georgia Gulf may be forced to pay additional transportation costs or to invest in capital projects for pipelines or alternate facilities to accommodate railcar or other delivery or to replace other services.

While Georgia Gulf believes that its relationships with its key suppliers are strong, any vendor may choose, subject to existing contracts, to modify its relationship due to general economic concerns or concerns relating to the vendor or Georgia Gulf, at any time. Any significant change in the terms that Georgia Gulf has with its key

 

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suppliers could materially adversely affect Georgia Gulf’s financial condition and liquidity, as could significant additional requirements from Georgia Gulf’s suppliers that it provides them additional security in the form of prepayments or with letters of credit.

The industries in which Georgia Gulf competes and expects to compete after the consummation of the Merger are highly competitive, and some of Georgia Gulf’s competitors have greater financial and other resources than Georgia Gulf has, which may materially adversely affect Georgia Gulf’s business and results of operations.

The commodity chemicals industry is highly competitive. Many of Georgia Gulf’s competitors are larger and have, and are expected to continue to have after the consummation of the Merger, greater financial and other resources and less debt than Georgia Gulf. Moreover, barriers to entry, other than capital availability, are low in most product lines of Georgia Gulf’s current and contemplated commodity chemical business. Capacity additions or technological advances by existing or future competitors could also create greater competition, particularly in pricing. Georgia Gulf cannot provide assurance that it will have access to the financing necessary to upgrade Georgia Gulf’s facilities in response to technological advances or other competitive developments.

In addition, Georgia Gulf competes with national and international manufacturers of vinyl-based building and home improvement products. Some of these companies are larger and have greater financial resources and less debt than Georgia Gulf. Accordingly, these competitors may be better able to withstand changes in conditions within the industries in which Georgia Gulf operates and may have significantly greater operating and financial flexibility than Georgia Gulf. Some of these competitors, who compete with Georgia Gulf’s building product lines, may also be able to compete more aggressively in pricing and could take a greater share of sales and cause Georgia Gulf to lose business from its customers. Many of Georgia Gulf’s competitors have operated in the building products industry for longer than Georgia Gulf. Additionally, Georgia Gulf’s building products face competition from alternative materials: wood, metal, fiber cement and masonry in siding, wood and aluminum in windows and iron and cement in pipe and fittings. An increase in competition from other vinyl exterior building products manufacturers or alternative building materials could cause Georgia Gulf to lose customers and lead to decreases in net sales and profitability. To the extent Georgia Gulf loses customers in the renovation and remodeling markets, Georgia Gulf would likely have to market to the new home construction market, which historically has experienced more fluctuations in demand.

Georgia Gulf currently relies and, after the consummation of the Merger will more heavily rely, on third party transportation, which subjects it to risks that it cannot control, and which risks may materially adversely affect Georgia Gulf’s operations.

Georgia Gulf relies heavily on railroads, barges and other shipping companies to transport raw materials to Georgia Gulf’s manufacturing facilities and to ship finished product to customers. After the consummation of the Merger, Georgia Gulf expects it will more heavily rely on third party transport for products manufactured by the PPG Chlor-alkali and Derivatives Business. These transport operations are subject to various hazards, including extreme weather conditions, work stoppages and operating hazards, as well as interstate transportation regulations. If Georgia Gulf is delayed or unable to ship finished product or unable to obtain raw materials as a result of these transportation companies’ failure to operate properly, or if there were significant changes in the cost of these services, Georgia Gulf may not be able to arrange efficient alternatives and timely means to obtain raw materials or ship goods, which could result in a material adverse effect on Georgia Gulf’s revenues and costs of operations.

Operation on multiple Enterprise Resource Planning (“ERP”) information systems, and the conversion from multiple systems to a single system, may negatively impact Georgia Gulf’s operations.

Georgia Gulf is and will continue to remain after consummation of the Merger highly dependent on its information systems infrastructure in order to process orders, track inventory, ship products in a timely manner, prepare invoices to its customers, maintain regulatory compliance and otherwise carry on its business in the

 

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ordinary course. Georgia Gulf currently operates on multiple ERP information systems, which complicate Georgia Gulf’s processing, reporting and analysis of business transactions and other information. In addition, the PPG Chlor-alkali and Derivatives Business currently operates on separate ERP systems. Since Georgia Gulf must process and reconcile its information from multiple systems, the chance of errors is increased and, after the consummation of the Merger, will be further increased, and Georgia Gulf may incur significant additional costs related thereto. Inconsistencies in the information from multiple ERP systems could adversely impact Georgia Gulf’s ability to manage its business efficiently and may result in heightened risk to its ability to maintain its books and records and comply with regulatory requirements. Following the consummation of the Transactions, Georgia Gulf expects that it may transition all or a portion of its operations from one of its ERP systems to another. The transition to a different ERP system involves numerous risks, including:

 

   

diversion of management’s attention away from normal daily business operations;

 

   

loss of, or delays in accessing data;

 

   

increased demand on its operations support personnel;

 

   

initial dependence on unfamiliar systems while training personnel to use new systems; and

 

   

increased operating expenses resulting from training, conversion and transition support activities.

Any of the foregoing could result in a material increase in information technology compliance or other related costs, and could materially negatively impact Georgia Gulf’s operations.

A significant portion of the PPG Chlor-alkali and Derivatives Business’s hourly workers are and, following the consummation of the Transactions, a significant portion of Georgia Gulf’s hourly workers will be, represented by labor unions and therefore subject to collective bargaining agreements; if Georgia Gulf is unable to enter into new agreements or renew existing agreements before they expire, its workers subject to collective bargaining agreements could engage in strikes or other labor actions that could materially disrupt Georgia Gulf’s ability to conduct its operations.

As of September 30, 2012, Georgia Gulf had approximately 3,760 active employees. Approximately 500, or 13%, of these employees are represented by labor unions and are therefore subject to collective bargaining agreements. As of September 30, 2012, assuming the Transactions had been consummated as of that date, Georgia Gulf would have had approximately 5,900 active employees. Approximately 27% of these employees would have been represented by labor unions and would have therefore been subject to collective bargaining agreements. Of these union-represented employees, approximately 12% are subject to collective bargaining agreements that expire by the end of 2013.

If, after the consummation of the Transactions, Georgia Gulf is unable to reach new collective bargaining agreements or renew existing agreements, employees subject to collective bargaining agreements may engage in strikes, work slowdowns or other labor actions, which could materially disrupt Georgia Gulf’s ability to conduct its operations. New collective bargaining agreements or the renewal of existing agreements may impose significant new costs on Georgia Gulf after the consummation of the Transactions, which could adversely affect Georgia Gulf’s results of operations or financial condition in the future.

As a result of the Merger, Georgia Gulf’s goodwill, indefinite-lived intangible assets, and other intangible assets in its statement of financial position will increase. If its goodwill, indefinite-lived intangible assets, or other intangible assets become impaired in the future, Georgia Gulf may be required to record a non-cash charge to earnings, which could be significant.

Under GAAP, goodwill and indefinite-lived intangible assets are reviewed for impairment on an annual basis (or more frequently if events or circumstances indicate that their carrying value may not be recoverable) and other intangible assets are reviewed if events or circumstances indicate that their carrying value may not be

 

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recoverable. If Georgia Gulf’s goodwill, indefinite-lived intangible assets, or other intangible assets are determined to be impaired in the future, Georgia Gulf may be required to record a non-cash charge to earnings during the period in which the impairment is determined, which could be significant.

Subject to any limits that may be imposed on Georgia Gulf in connection with the Transactions, and before or after consummating the Transactions, Georgia Gulf may evaluate asset dispositions, asset acquisitions, joint ventures, and other transactions that may impact its results of operations, and which may not result in Georgia Gulf achieving the expected results therefrom.

From time to time before and after the Transactions, and subject to any applicable restrictions arising from the Transactions or otherwise, Georgia Gulf may enter into agreements to dispose of certain assets. However, Georgia Gulf cannot assure you that it will be able to dispose of any such assets at any anticipated prices, or at all, or that any such sale will occur during any anticipated time frame. In addition, subject to any applicable restrictions arising from the Transactions or otherwise, Georgia Gulf may engage in business combinations, purchases of assets or contractual arrangements or joint ventures. Subject to any applicable restrictions arising from the Transactions or otherwise, some of these transactions may be financed with additional borrowings by Georgia Gulf. The integration of any business Georgia Gulf may acquire may be disruptive to Georgia Gulf and may result in a significant diversion of management attention and operational resources. Additionally, Georgia Gulf may suffer a loss of key employees, customers or suppliers, loss of revenues, increases in costs or other difficulties. If the expected efficiencies and synergies from any transactions are not fully realized, Georgia Gulf’s results of operations could be adversely affected, because of the costs associated with such transactions or otherwise. Other transactions may advance future cash flows from some of Georgia Gulf’s businesses, thereby yielding increased short-term liquidity, but consequently resulting in lower cash flows from these operations over the longer term. The failure to realize the expected long-term benefits of any one or more of these transactions could have a material adverse effect on Georgia Gulf’s financial condition or results of operations.

Participation in joint ventures exposes Georgia Gulf to a number of risks, including risks of shared control.

From time to time Georgia Gulf enters into joint ventures, such as its building products strategic joint venture arrangements with several customers and, following the consummation of the Transactions, Georgia Gulf will have ownership interest in TCI and the joint venture between the PPG Chlor-alkali and Derivatives Business and an affiliate of Entergy Corporation. Georgia Gulf expects that it will evaluate opportunities to enter into additional joint ventures in the future, subject to any limits that may be imposed on Georgia Gulf in connection with the Transactions or otherwise. The nature of a joint venture requires Georgia Gulf to share control with unaffiliated third parties. If there are differences in views among joint venture participants in how to operate the joint venture that result in delayed decisions or the failure to make decisions, or its joint venture partners do not fulfill their obligations, the affected joint venture may not be able to operate according to its business plan and fulfill its obligations. In that case, Georgia Gulf may be required to write down the value of its investment in a joint venture, increase the level of financial or other commitments to the joint venture or, if Georgia Gulf has contractual agreements with the joint venture, its operations may be materially adversely affected. Any of the foregoing could have a material adverse effect on Georgia Gulf’s financial condition, results of operations or cash flows.

Fluctuations in foreign currency exchange and interest rates could affect Georgia Gulf’s consolidated financial results.

Georgia Gulf currently earns, and expects to continue to earn, revenues, pays expenses, owns assets and incurs liabilities in countries using currencies other than the U.S. dollar. Because Georgia Gulf’s consolidated financial statements are presented in U.S. dollars, it must translate revenues and expenses into U.S. dollars at the average exchange rate during each reporting period, as well as assets and liabilities into U.S. dollars at exchange rates in effect at the end of each reporting period. Therefore, increases or decreases in the value of the U.S. dollar

 

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against other major currencies will affect Georgia Gulf’s net revenues, operating income and the value of balance sheet items denominated in foreign currencies. Because of the geographic diversity of Georgia Gulf’s operations, weaknesses in various currencies might occur in one or many of such currencies over time. From time to time, Georgia Gulf may use derivative financial instruments to further reduce its net exposure to currency exchange rate fluctuations. However, Georgia Gulf cannot assure you that fluctuations in foreign currency exchange rates, particularly the strengthening of the U.S. dollar against major currencies, would not materially adversely affect its financial results.

In addition, Georgia Gulf is exposed to volatility in interest rates. When appropriate, Georgia Gulf may use derivative financial instruments to reduce its exposure to interest rate risks. Georgia Gulf cannot assure you, however, that its financial risk management program will be successful in reducing the risks inherent in exposures to interest rate fluctuations.

 

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CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

This document contains and incorporates by reference certain statements relating to future events and each of PPG’s, Splitco’s and Georgia Gulf’s intentions, beliefs, expectations, and predictions for the future. Any such statements other than statements of historical fact are forward-looking statements within the meaning of the Securities Act and the Securities Exchange Act. Words or phrases such as “will likely result,” “are expected to,” “will continue,” “is anticipated,” “we believe,” “we expect,” “estimate,” “project,” “may,” “will,” “intend,” “plan,” “believe,” “target,” “forecast,” “would” or “could” (including the negative variations thereof) or similar terminology used in connection with any discussion of future plans, actions or events, including with respect to the Transactions, generally identify forward-looking statements. These forward-looking statements include, but are not limited to, statements regarding expected benefits of the Transactions, integration plans and expected synergies therefrom, the expected timing of consummation of the Transactions, and each of PPG’s, Splitco’s and Georgia Gulf’s anticipated future financial and operating performance and results, including its estimates for growth. These statements are based on the current expectations of management of each of PPG, Splitco and Georgia Gulf. There are a number of risks and uncertainties that could cause each company’s actual results to differ materially from the forward-looking statements included in this document. These risks and uncertainties include risks relating to (1) Georgia Gulf’s ability to obtain requisite shareholder approval to complete the Transactions, (2) PPG being unable to obtain the regulatory approvals required to complete the Transactions, or such required approvals delaying the Transactions or resulting in the imposition of conditions that could have a material adverse effect on the combined company or causing the companies to abandon the Transactions, (3) other conditions to the closing of the Transactions not being satisfied, (4) a material adverse change, event or occurrence affecting Georgia Gulf or the PPG Chlor-alkali and Derivatives Business prior to the closing of the Transactions delaying the Transactions or causing the companies to abandon the Transactions, (5) problems arising in successfully integrating the PPG Chlor-alkali and Derivatives Business and Georgia Gulf, which may result in the combined company not operating as effectively and efficiently as expected, (6) the possibility that the Transactions may involve other unexpected costs, liabilities or delays, (7) the businesses of each respective company being negatively impacted as a result of uncertainty surrounding the Transactions, (8) disruptions from the Transactions harming relationships with customers, employees or suppliers, and (9) uncertainties regarding (i) future prices, (ii) industry capacity levels and demand for each company’s products, (iii) raw materials and energy costs and availability, feedstock availability and prices, (iv) changes in governmental and environmental regulations, the adoption of new laws or regulations that may make it more difficult or expensive to operate each company’s businesses or manufacture its products before or after the Transactions, (v) each company’s ability to generate sufficient cash flows from its businesses before and after the Transactions, (vi) future economic conditions in the specific industries to which its respective products are sold and (vii) global economic conditions.

In light of these risks, uncertainties, assumptions and other factors, the forward-looking statements discussed in this document may not occur. Other unknown or unpredictable factors could also have a material adverse effect on each of PPG’s, Splitco’s and Georgia Gulf’s actual future results, performance, or achievements. For a further discussion of these and other risks and uncertainties, see the section of this document entitled “Risk Factors.” As a result of the foregoing, readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document. None of PPG, Splitco or Georgia Gulf undertakes, and each expressly disclaims, any duty to update any forward-looking statement whether as a result of new information, future events, or changes in its respective expectations, except as required by law.

 

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THIS EXCHANGE OFFER

Terms of this Exchange Offer

General

PPG is offering to exchange all shares of Splitco common stock that are owned by PPG for shares of PPG common stock, at an exchange ratio to be calculated in the manner described below, on the terms and conditions and subject to the limitations described below and in the letter of transmittal (including the instructions thereto) filed as an exhibit to the registration statement of which this document forms a part, by 8:00 a.m., New York City time, on January 28, 2013, unless this exchange offer is extended or terminated. The last day on which tenders will be accepted, whether on January 28, 2013 or any later date to which this exchange offer is extended, is referred to in this document as the “expiration date.” You may tender all, some or none of your shares of PPG common stock.

Approximately 35,236,010 shares of Splitco common stock will be held by PPG upon completion of the Separation, subject to adjustment under certain circumstances. The number of shares of PPG common stock that will be accepted if this exchange offer is completed will depend on the final exchange ratio, the number of shares of Splitco common stock offered and the number of shares of PPG common stock tendered; provided that PPG will only accept a number of shares of PPG common stock up to the Maximum Amount.

PPG’s obligation to complete this exchange offer is subject to important conditions that are described in the section entitled “—Conditions for Consummation of this Exchange Offer.”

For each share of PPG common stock that you validly tender in this exchange offer and do not properly withdraw and that are accepted, you will receive a number of shares of Splitco common stock at a 10% discount to the per–share value of Georgia Gulf common stock, calculated as set forth below, subject to an upper limit of 3.9745 shares of Splitco common stock per share of PPG common stock. Stated another way, subject to the upper limit described below, for each $1.00 of PPG common stock accepted in this exchange offer, you will receive approximately $1.11 of Splitco common stock.

The final calculated per–share values will be equal to:

(i) with respect to PPG common stock, the simple arithmetic average of the daily VWAP of PPG common stock on the NYSE for each of the Valuation Dates, as reported to PPG by Bloomberg L.P. for the equity ticker PPG; and

(ii) with respect to Splitco common stock, the simple arithmetic average of the daily VWAP of Georgia Gulf common stock on the NYSE for each of the Valuation Dates, as reported to PPG by Bloomberg L.P. on the equity ticker GGC.

The daily VWAP provided by Bloomberg L.P. may be different from other sources of volume–weighted average prices or investors’ or security holders’ own calculations of volume–weighted average prices. PPG will determine such calculations of the per–share values of PPG common stock and Splitco common stock, and such determination will be final.

If the upper limit on the number of shares that can be received for each share of PPG common stock tendered is in effect at the expiration of the exchange offer period, then the exchange ratio will be fixed at the limit and a Mandatory Extension of this exchange offer will be made until 8:00 a.m., New York City time, on the day after the second trading day following the last trading day prior to the originally contemplated expiration date. See “—Extension; Termination; Amendment—Mandatory Extension.”

 

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Upper Limit

The number of shares you can receive is subject to an upper limit of 3.9745 shares of Splitco common stock for each share of PPG common stock accepted in this exchange offer. If the upper limit is in effect, a stockholder will receive less than $1.11 of Splitco common stock for each $1.00 of PPG common stock that the stockholder validly tenders, that is not properly withdrawn and that is accepted in the exchange offer, and the stockholder could receive much less. This limit was calculated based on a 20% discount for Splitco common stock based on the average of the daily VWAPs of PPG common stock and Georgia Gulf common stock on December 21, 2012, December 24, 2012 and December 26, 2012 (the last three trading days before the commencement of this exchange offer). PPG set this limit to ensure that an unusual or unexpected drop in the trading price of Georgia Gulf common stock, relative to the trading price of PPG common stock, would not result in an unduly high number of shares of Splitco common stock being exchanged for each share of PPG common stock accepted in this exchange offer.

Pricing Mechanism

The terms of this exchange offer are designed to result in your receiving $1.11 of Splitco common stock for each $1.00 of PPG common stock validly tendered, not properly withdrawn and accepted in this exchange offer, based on the calculated per–share values described above. This exchange offer does not provide for a minimum exchange ratio because a minimum exchange ratio could result in the shares of Splitco common stock exchanged for each $1.00 of PPG common stock being valued higher than approximately $1.11. Regardless of the final exchange ratio, the terms of this exchange offer would always result in your receiving approximately $1.11 of Splitco common stock for each $1.00 of PPG common stock, so long as the upper limit is not in effect. See the table on page 66 for purposes of illustration.

Subject to the upper limit described above, for each $1.00 of PPG common stock accepted in this exchange offer, you will receive approximately $1.11 of Splitco common stock. The following formula will be used to calculate the number of shares of Splitco common stock you will receive for shares of PPG common stock accepted in this exchange offer:

 

Number of shares of

Splitco common stock

 

 

 

 

=

 

  

  

Number of shares of

PPG common stock

tendered and accepted,

multiplied by the lesser of:

      (a) 3.9745        and      (b)   100% of the calculated per–
share value of PPG
common stock divided by
90% of the calculated per–
share value of Splitco
common stock (calculated
as described below)

The calculated per–share value of a share of PPG common stock for purposes of this exchange offer will equal the simple arithmetic average of the daily VWAP of PPG common stock on the NYSE on each of the Valuation Dates. The calculated per–share value of a share of Splitco common stock for purposes of this exchange offer will equal the simple arithmetic average of the daily VWAP of Georgia Gulf common stock on the NYSE on each of the Valuation Dates.

If the upper limit is in effect, the exchange ratio will be fixed and the calculated per–share values of PPG common stock and Splitco common stock based on the daily VWAP of PPG common stock and Georgia Gulf common stock during the Mandatory Extension will no longer affect the exchange ratio. To help illustrate the way this calculation works, below are two examples:

Example 1: Assuming that the average of the daily VWAP on the Valuation Dates is $134.4289 per share of PPG common stock and $42.2782 per share of Georgia Gulf common stock, you would receive 3.5329 shares ($134.4289 divided by 90% of $42.2782) of Splitco common stock for each share of PPG common stock accepted in this exchange offer. In this example, the upper limit of 3.9745 shares of Splitco common stock for each share of PPG common stock would not apply.

 

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Example 2: Assuming that the average of the daily VWAP on the Valuation Dates is $147.8718 per share of PPG common stock and $38.0504 per share of Georgia Gulf common stock, the limit would apply and you would only receive 3.9745 shares of Splitco common stock for each share of PPG common stock accepted in this exchange offer because the limit is less than 4.3180 ($147.8718 divided by 90% of $38.0504) of Splitco common stock for each share of PPG common stock. Because the upper limit would apply, this exchange offer would be automatically extended until 8:00 a.m., New York City time, on the day after the second trading day following the last trading day prior to the originally contemplated expiration date, and the exchange ratio would be fixed at the upper limit.

Indicative Per-Share Values

You will be able to review indicative exchange ratios and calculated per–share values of PPG common stock and Splitco common stock and the final exchange ratio used to determine the number of shares of Splitco common stock to be exchanged per share of PPG common stock. A website will be maintained at http://www.edocumentview.com/PPGINDUSTRIES that provides indicative exchange ratios and calculated per-share values of PPG common stock and Splitco common stock.

From the commencement of this exchange offer until the first Valuation Date, the website will show the indicative calculated per–share values, calculated as though that day were the expiration date of this exchange offer, of (i) PPG common stock, which will equal the simple arithmetic average of the daily VWAP of PPG common stock, as calculated by PPG, on each of the three prior trading days and (ii) Splitco common stock, which will equal the simple arithmetic average of the daily VWAP of Georgia Gulf common stock, as calculated by PPG, on each of the three prior trading days.

On each of the Valuation Dates, when the values of PPG common stock and Splitco common stock are calculated for the purposes of this exchange offer, the website will show the indicative calculated per–share values of PPG common stock and Splitco common stock, as calculated by PPG, which will equal, with respect to each stock, (i) on the first Valuation Date, the intra–day VWAP during the elapsed portion of that day, (ii) on the second Valuation Date, the intra–day VWAP during the elapsed portion of that day averaged with the actual daily VWAP on the first Valuation Date and (iii) on the third Valuation Date, the intra–day VWAP during the elapsed portion of that day averaged with the actual daily VWAP on the first Valuation Date and with the actual daily VWAP on the second Valuation Date. “Intra–day VWAP” means VWAP for the period beginning at the official open of trading on the NYSE and ending as of the specific time in such day. On each of the Valuation Dates, the indicative calculated per-share values and indicative exchange ratio calculated using such values will be updated at 10:30 a.m., 1:30 p.m. and by 4:30 p.m., New York City time.

Final Exchange Ratio

The final exchange ratio that shows the number of shares of Splitco common stock that you will receive for each share of PPG common stock accepted in this exchange offer will be available at http://www.edocumentview.com/PPGINDUSTRIES and announced by press release by 4:30 p.m., New York City time, on January 28, 2013, unless this exchange offer is extended or terminated.

You may also contact the information agent to obtain these indicative exchange ratios and the final exchange ratio at its toll–free number provided on the back cover of this document.

Each of the daily VWAPs, intra–day VWAPs, calculated per–share values and the final exchange ratio will be rounded to four decimal places.

If a market disruption event occurs with respect to PPG common stock or Georgia Gulf common stock on any of the Valuation Dates, the calculated per–share value of PPG common stock and Splitco common stock will be determined using the daily VWAP of PPG common stock and Georgia Gulf common stock on the preceding

 

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trading day or days, as the case may be, on which no market disruption event occurred with respect to both PPG common stock and Georgia Gulf common stock. See “—Conditions for Consummation of this Exchange Offer.”

Since this exchange offer is scheduled to expire at 8:00 a.m., New York City time, on the last day of the exchange offer period, and the final exchange ratio will be announced by 4:30 p.m., New York City time, on the last trading day prior to the expiration date of this exchange offer, you will be able to tender or withdraw your shares of PPG common stock after the final exchange ratio is determined. For more information on validly tendering and properly withdrawing your shares, see “—Procedures for Tendering” and “—Withdrawal Rights.”

For the purposes of illustration, the table below indicates the number of shares of Splitco common stock that you would receive per share of PPG common stock, calculated on the basis described above and taking into account the limit described above, assuming a range of averages of the daily VWAP of PPG common stock and Georgia Gulf common stock on the Valuation Dates. The first row of the table below shows the indicative calculated per–share values of PPG common stock and Splitco common stock and the indicative exchange ratio that would have been in effect following the official close of trading on the NYSE on December 26, 2012, based on the daily VWAPs of PPG common stock and Georgia Gulf common stock on December 21, 2012, December 24, 2012 and December 26, 2012. The table also shows the effects of a 10% increase or decrease in either or both the calculated per–share values of PPG common stock and Splitco common stock based on changes relative to the values of December 26, 2012.

 

PPG common stock

 

Georgia Gulf

common stock

  Calculated
per-share
value of PPG
common stock
    Calculated
per-share
value of Splitco
common stock
    Shares of
Splitco  common
stock to be
received per
share of PPG

common stock
tendered
    Calculated
Value  Ratio(1)
 

As of December 26, 2012

 

As of December 26, 2012

  $ 134.4289      $ 42.2782        3.5329 x      $ 1.11   

(1) Down 10%

 

Up 10%

    120.9860        46.5060        2.8906 x        1.11   

(2) Down 10%

 

Unchanged

    120.9860        42.2782        3.1796 x        1.11   

(3) Down 10%

 

Down 10%

    120.9860        38.0504        3.5329 x        1.11   

(4) Unchanged

 

Up 10%

    134.4289        46.5060        3.2117 x        1.11   

(5) Unchanged

 

Down 10%

    134.4289        38.0504        3.9255 x        1.11   

(6) Up 10%

 

Up 10%

    147.8718        46.5060        3.5329 x        1.11   

(7) Up 10%

 

Unchanged

    147.8718        42.2782        3.8862 x        1.11   

(8) Up 10%

 

Down 10%(2)

    147.8718        38.0504        3.9745 x        1.02   

 

(1) The Calculated Value Ratio equals (i) the calculated per-share value of Splitco common stock multiplied by the exchange ratio, divided by (ii) the calculated per-share value of PPG common stock.
(2) In this scenario, the upper limit is in effect. Absent the upper limit, the exchange ratio would have been 4.3180 shares of Splitco common stock per share of PPG common stock validly tendered and accepted in this exchange offer. In this scenario, PPG would announce that the upper limit on the number of shares that can be received for each share of PPG common stock tendered is in effect at the expiration of the exchange offer period no later than 4:30 p.m., New York City time, on the last trading day prior to the expiration date, the exchange ratio would be fixed at the upper limit and this exchange offer would be extended until 8:00 a.m., New York City time, on the day after the second trading day following the last trading day prior to the originally scheduled expiration date.

During the three–month period of September 26, 2012 through December 26, 2012, the highest closing price of PPG common stock on the NYSE was $135.24 and the lowest closing price of Georgia Gulf common stock on the NYSE was $35.39. If the calculated per–share values of PPG common stock and Splitco common stock equaled these closing prices, you would receive only the limit of 3.9745 shares of Splitco common stock for each share of PPG common stock tendered, and the value of such shares of Splitco common stock, based on the Georgia Gulf common stock price, would have been approximately $1.04 of Splitco common stock for each $1.00 of PPG common stock accepted for exchange.

 

 

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If the trading price of PPG common stock were to increase during the last two trading days prior to the expiration of this exchange offer, the average PPG stock price used to calculate the exchange ratio would likely be lower than the closing price of PPG common stock on the expiration date of this exchange offer. As a result, you may receive fewer shares of Splitco common stock, and therefore effectively fewer shares of Georgia Gulf common stock, for each $1.00 of PPG common stock than you would have if that per–share value were calculated on the basis of the closing price of PPG common stock on the expiration date of this exchange offer. Similarly, if the trading price of Georgia Gulf common stock were to decrease during the last two trading days prior to the expiration of this exchange offer, the average Splitco common stock used to calculate the exchange ratio would likely be higher than the closing price of Georgia Gulf common stock on the expiration date of this exchange offer, or on the basis of an averaging period that included the last two days of the exchange offer period. This could also result in your receiving fewer shares of Splitco common stock, and therefore effectively fewer shares of Georgia Gulf common stock, for each $1.00 of PPG common stock than you would otherwise receive if that per–share value were calculated on the basis of the closing price of Georgia Gulf common stock on the expiration date of this exchange offer, or on the basis of an averaging period that included the last two days of the exchange offer period.

The number of shares of PPG common stock that may be accepted in this exchange offer may be subject to proration. Depending on the number of shares of PPG common stock validly tendered, and not properly withdrawn in this exchange offer, and the final exchange ratio, determined as described above, PPG may have to limit the number of shares of PPG common stock that it accepts in this exchange offer through a proration process. Any proration of the number of shares accepted in this exchange offer will be determined on the basis of the proration mechanics described below under “—Proration; Tenders for Exchange by Holders of Fewer than 100 Shares of PPG Common Stock.”

This document and related documents are being sent to persons who directly held shares of PPG common stock on December 27, 2012 and brokers, banks and similar persons whose names or the names of whose nominees appear on PPG’s shareholder list or, if applicable, who are listed as participants in a clearing agency’s security position listing for subsequent transmittal to beneficial owners of PPG’s common stock.

Proration; Tenders for Exchange by Holders of Fewer than 100 Shares of PPG Common Stock

If, upon the expiration of this exchange offer, PPG shareholders have validly tendered and not properly withdrawn more shares of PPG common stock than PPG is able to accept for exchange (taking into account the Maximum Amount, exchange ratio and the total number of shares of Splitco common stock owned by PPG), PPG will accept for exchange the PPG common stock validly tendered and not properly withdrawn by each tendering shareholder on a pro rata basis, based on the proportion that the total number of shares of PPG common stock to be accepted bears to the total number of shares of PPG common stock validly tendered and not properly withdrawn (rounded to the nearest whole number of shares of PPG common stock), and subject to any adjustment necessary to ensure the exchange of all shares of Splitco common stock owned by PPG, except for tenders of odd–lots, as described below.

Except as otherwise provided in this section, beneficial holders (other than plan participants in the PPG Employee Savings Plan or PPG Defined Contribution Retirement Plan) of less than 100 shares of PPG common stock who validly tender all of their shares will not be subject to proration if this exchange offer is oversubscribed. Beneficial holders of more than 100 shares of PPG common stock are not eligible for this preference.

Any beneficial holder (other than plan participants in the PPG Employee Savings Plan or PPG Defined Contribution Retirement Plan) of less than 100 shares of PPG common stock who wishes to tender all of the shares must complete the box entitled “Odd–Lot Shares” on the letter of transmittal. If your odd–lot shares are held by a broker for your account, you can contact your broker and request the preferential treatment.

 

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PPG will announce the preliminary proration factor by press release promptly after the expiration date. Upon determining the number of shares of PPG common stock validly tendered for exchange, PPG will announce the final results, including the final proration factor.

Any shares of PPG common stock not accepted for exchange in this exchange offer as a result of proration or otherwise will be returned to the tendering shareholder promptly after the final proration factor is determined. For a discussion of the “when distributed” market expected to be created by the NYSE, see “—When Distributed and When Issued Markets.”

For purposes of this exchange offer, a “business day” means any day other than a Saturday, Sunday or U.S. federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight, New York City time.

Fractional Shares

Immediately following the consummation of this exchange offer, Merger Sub will be merged with and into Splitco, whereby Splitco will continue as the surviving company and a wholly-owned subsidiary of Georgia Gulf. Each outstanding share of Splitco common stock will be converted into the right to receive a number of shares of Georgia Gulf common stock equal to (a) the greater of (i) 35,200,000 shares of Georgia Gulf common stock or (ii) the product of (x) the number of shares of Georgia Gulf common stock issued and outstanding immediately prior to the effective time of the Merger multiplied by (y) 1.02020202, divided by (b) the number of shares of Splitco common stock issued and outstanding immediately prior to the effective time of the Merger, while the shares of Splitco common stock will automatically be canceled and retired and will cease to exist. In this conversion of shares of Splitco common stock into shares of Georgia Gulf common stock, no fractional shares of Georgia Gulf common stock will be delivered to holders of Splitco common stock. All fractional shares of Georgia Gulf common stock that a holder of shares of Splitco common stock would otherwise be entitled to receive as a result of the Merger will be aggregated by the transfer agent. The transfer agent will cause the whole shares obtained thereby to be sold on behalf of such holders of shares of Splitco common stock that would otherwise be entitled to receive such fractional shares of Georgia Gulf common stock in the Merger, in the open market or otherwise as reasonably directed by PPG, and in no case later than five business days after the Merger. The transfer agent will make available the net proceeds thereof, after deducting any required withholding taxes and brokerage charges, commissions and transfer taxes, on a pro rata basis, without interest, as soon as practicable to the holders of Splitco common stock that would otherwise be entitled to receive such fractional shares of Georgia Gulf common stock in the Merger. The amount of cash necessary to make the payments in lieu of any fractional shares will be made available to the transfer agent by Georgia Gulf.

Exchange of Shares of PPG Common Stock

Upon the terms and subject to the conditions of this exchange offer (including, if this exchange offer is extended or amended, the terms and conditions of the extension or amendment), PPG will accept for exchange, and will exchange, for shares of Splitco common stock owned by PPG, the PPG common stock validly tendered, and not properly withdrawn, prior to the expiration of this exchange offer, promptly after the expiration date.

The exchange of PPG common stock tendered and accepted for exchange pursuant to this exchange offer will be made only after timely receipt by the exchange offer agent of (a)(i) certificates representing all physically tendered shares of PPG common stock or (ii) in the case of shares delivered by book-entry transfer through The Depository Trust Company, confirmation of a book-entry transfer of those shares of PPG common stock in the exchange offer agent’s account at The Depository Trust Company, in each case pursuant to the procedures set forth in the section below entitled “—Procedures for Tendering,” (b) the letter of transmittal for PPG common stock, properly completed and duly executed, with any required signature guarantees, or, in the case of a book–entry transfer through The Depository Trust Company, an agent’s message and (c) any other required documents.

For purposes of this exchange offer, PPG will be deemed to have accepted for exchange, and thereby exchanged, PPG common stock validly tendered and not properly withdrawn if and when PPG notifies the exchange offer agent of its acceptance of the tenders of those shares of PPG common stock pursuant to this exchange offer.

 

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Upon the consummation of this exchange offer, PPG will deliver to the exchange offer agent a global certificate representing all of the Splitco common stock being distributed in this exchange offer, with instructions to hold the shares of Splitco common stock in trust for the holders of PPG common stock validly tendered and not withdrawn as of the record date for a pro rata distribution and, to the extent necessary, dividend (as described below under “—Distribution of Any Shares of Splitco Common Stock Remaining After this Exchange Offer”), if any. Georgia Gulf will deposit with the transfer agent for the benefit of persons who received shares of Splitco common stock in this exchange offer certificates or book-entry authorizations representing shares of Georgia Gulf common stock, with irrevocable instructions to hold the shares of Georgia Gulf common stock in trust for the holders of Splitco common stock.

Upon surrender of the documents required by the transfer agent, duly executed, each former holder of Splitco common stock will receive from the transfer agent in exchange therefor shares of Georgia Gulf common stock and/or cash in lieu of fractional shares, as the case may be. You will not receive any interest on any cash paid to you, even if there is a delay in making the payment.

If PPG does not accept for exchange any tendered PPG common stock for any reason pursuant to the terms and conditions of this exchange offer, the exchange offer agent (a) in the case of shares of PPG common stock held in certificated form, will return certificates representing such shares without expense to the tendering shareholder and (b) in the case of shares tendered by book-entry transfer pursuant to the procedures set forth below in the section entitled “—Procedures for Tendering,” such shares will be credited to an account maintained within The Depository Trust Company, in each case promptly following expiration or termination of this exchange offer.

Procedures for Tendering

Shares Held in Certificated Form/Book-Entry DRS

If you hold certificates representing shares of PPG common stock, or if your shares of PPG common stock are held in book-entry via the Direct Registration System (“DRS”), you must deliver to the exchange offer agent at the address listed on the letter of transmittal a properly completed and duly executed letter of transmittal, along with any required signature guarantees and any other required documents, and the certificates representing the shares of PPG common stock tendered.

Shares Held Through a Broker, Dealer, Commercial Bank, Trust Company or Similar Institution

If you hold shares of PPG common stock through a broker, dealer, commercial bank, trust company or similar institution and wish to tender your shares of PPG common stock in this exchange offer, you should follow the instructions sent to you separately by that institution. In this case, you should not use a letter of transmittal to direct the tender of your PPG common stock. If that institution holds shares of PPG common stock through The Depository Trust Company, it must notify The Depository Trust Company and cause it to transfer the shares into the exchange offer agent’s account in accordance with The Depository Trust Company’s procedures. The institution must also ensure that the exchange offer agent receives an agent’s message from The Depository Trust Company confirming the book–entry transfer of your PPG common stock. A tender by book–entry transfer will be completed upon receipt by the exchange offer agent of an agent’s message, book–entry confirmation from The Depository Trust Company and any other required documents.

The term “agent’s message” means a message, transmitted by The Depository Trust Company to, and received by, the exchange offer agent and forming a part of a book–entry confirmation, which states that The Depository Trust Company has received an express acknowledgment from the participant in The Depository Trust Company tendering the shares of PPG common stock which are the subject of the book–entry confirmation, that the participant has received and agrees to be bound by the terms of the letter of transmittal (including the instructions thereto) and that PPG may enforce that agreement against the participant.

The exchange offer agent will establish an account with respect to the shares of PPG common stock at The Depository Trust Company for purposes of this exchange offer, and any eligible institution that is a participant in

 

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The Depository Trust Company may make book–entry delivery of shares of PPG common stock by causing The Depository Trust Company to transfer such shares into the exchange offer agent’s account at The Depository Trust Company in accordance with The Depository Trust Company’s procedure for the transfer. Delivery of documents to The Depository Trust Company does not constitute delivery to the exchange offer agent.

Shares Held in the PPG Employee Savings Plan or PPG Defined Contribution Retirement Plan

If shares of PPG common stock are held in your account under the PPG Employee Savings Plan or PPG Defined Contribution Retirement Plan, you can elect to either keep your shares of PPG common stock or exchange some or all of your shares of PPG common stock for shares of Georgia Gulf common stock. The deadline for making this election is three business days prior to the last day of the exchange offer period. You will receive instructions from the plan record keeper via letter or email informing you how to make an election. If you do not make an active election at least three business days prior to the last day of the exchange offer period, none of the shares of PPG common stock in your account will be exchanged for shares of Georgia Gulf common stock and your holdings of shares of PPG common stock in your PPG Employee Savings Plan and PPG Defined Contribution Retirement Plan will remain unchanged. If the limit on the number of shares that can be received for each share of PPG common stock is in effect at the expiration of the originally contemplated exchange offer period, participants in the PPG Employee Savings Plan and/or PPG Defined Contribution Retirement Plan will not be able to tender their shares during the extension period and will only be able to withdraw their shares until 5:00 p.m., New York City time, on the first trading day of the two business day extension period. If you elect to exchange some or all of your shares of PPG common stock for shares of Georgia Gulf common stock, you will be required to liquidate the shares of Georgia Gulf common stock that you received in your plan account no later than the 180th day after the closing of the Merger and reallocate the sale proceeds to one or more of the other investment options with the plan. If you do not liquidate your shares of Georgia Gulf common stock prior to the liquidation deadline, your shares of Georgia Gulf common stock will be liquidated by the plan record keeper on the liquidation deadline date with the proceeds invested as set forth in the instructions from the plan record keeper. If the offer to exchange shares of PPG common stock for Georgia Gulf common stock is oversubscribed, the number of shares of PPG common stock that you elect to exchange will be subject to reduction. If you hold less than 100 shares of PPG common stock, wish to tender all of your shares of PPG common stock and the exchange offer is oversubscribed, your shares will be subject to proration. Any proration of the number of shares accepted in this exchange offer will be determined on the basis of the proration mechanics described under “Summary—Terms of this Exchange Offer—Proration; Odd-Lots.” Please contact the phone number in the letter or email you receive from the plan record keeper to speak with a customer service associate if you have not yet received instructions from the plan record keeper.

General Instructions

Do not send letters of transmittal and certificates representing PPG common stock to PPG, Georgia Gulf, Splitco or the information agent. Letters of transmittal for PPG common stock and certificates representing PPG common stock should be sent to the exchange offer agent at an address listed on the letter of transmittal. Trustees, executors, administrators, guardians, attorneys–in–fact, officers of corporations or others acting in a fiduciary or representative capacity who sign a letter of transmittal or any certificates or stock powers must indicate the capacity in which they are signing and must submit evidence of their power to act in that capacity unless waived by PPG.

Whether you tender your PPG common stock by delivery of certificates or through your broker, the exchange offer agent must receive the letter of transmittal for PPG common stock and the certificates representing your PPG common stock at the address set forth on the back cover of this document prior to the expiration of this exchange offer. Alternatively, in case of a book–entry transfer of PPG common stock through The Depository Trust Company, the exchange offer agent must receive the agent’s message and a book–entry confirmation.

Letters of transmittal for PPG common stock and certificates representing PPG common stock must be received by the exchange offer agent. Please read carefully the instructions to the letter of transmittal you have been sent. You should contact the information agent if you have any questions regarding tendering your PPG common stock.

 

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