Acquisitions

Axiall Corporation

On August 31, 2016, the Company completed its acquisition of, and acquired all the remaining equity interest in, Axiall, a Delaware corporation. Prior to the acquisition, the Company held 3.1 million shares in Axiall. The combined company is the third-largest global chlor-alkali producer and the third-largest global PVC producer. The Company's management believes that this strategic acquisition will enhance its strategy of integration and will further strengthen its role in the North American markets.

Axiall produces a highly integrated chain of chlor-alkali and derivative products, including chlorine, caustic soda, vinyl chloride monomer ("VCM"), PVC resin, PVC compounds and chlorinated derivative products. Axiall also manufactures and sells building products, including siding, trim, mouldings, pipe and pipe fittings.

Total consideration transferred for the Axiall Merger was $2,540. The Axiall Merger was accounted for under the acquisition method of accounting. The assets acquired and liabilities assumed and the results of operations of the acquired business are included in the Company's Vinyls segment.

For the year ended December 31, 2016, the Company recognized $104 of transaction and integration-related costs. This included acquisition-related costs of $49 for advisory, consulting and professional fees and other expenses during the year ended December 31, 2016. Transaction and integration-related costs also included $55 during the year ended December 31, 2016 related to the settlement of Axiall share-based awards, retention agreement costs and severance benefits provided to former Axiall employees in connection with the Axiall Merger.

The following table summarizes the consideration transferred and the estimated fair value of identified assets acquired and liabilities assumed at the date of acquisition. The allocation of the consideration transferred is based on management's estimates, judgments and assumptions. When determining the fair values of assets acquired, liabilities assumed and noncontrolling interests of the acquiree, management made significant estimates, judgments and assumptions. Management estimated that consideration paid exceeded the fair value of the net assets acquired. Therefore, goodwill of $942 was recorded. The goodwill recognized is primarily attributable to synergies related to the Company's vinyls integration strategy that are expected to arise from the Axiall Merger. All of the goodwill is assigned to the Company's Vinyls segment. As a portion of the goodwill arising from the Axiall Merger is attributable to foreign operations, there will be a continuing foreign currency impact to goodwill in the consolidated financial statements.



	Final Purchase Consideration as of August 31, 2016
Closing stock purchase:
Offer per share	$	33.00
Multiplied by number of shares outstanding at acquisition (in thousands of shares)	67,277
Fair value of Axiall shares outstanding purchased by the Company	2,220
Plus:
Axiall debt repaid at acquisition	247
Seller's transaction costs paid by the Company ⁽¹⁾	48
Total fair value of consideration transferred	2,515

Fair value of Axiall share-based awards attributed to pre-combination service ⁽²⁾	12
Additional settlement value of shares acquired	13
Purchase consideration	2,540

Fair value of previously held equity interest in Axiall ⁽³⁾	102
Total fair value allocated to net assets acquired	$	2,642

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(1)	Transactions costs incurred by the seller included legal and advisory costs incurred for the benefit of Axiall's former shareholders and board of directors to evaluate the Company's initial merger proposals, explore strategic alternatives and negotiate the purchase price.


(2)	The fair value of share-based awards attributable to pre-combination service includes the ratio of the pre-combination service performed to the original service period of the Axiall restricted share units and options, including related dividend equivalent rights.


(3)	Prior to the Axiall Merger, the Company owned 3.1 million shares in Axiall. The investment in Axiall was carried at estimated fair value with unrealized gains recorded as a component of accumulated other comprehensive loss in the consolidated balance sheet. The Company recognized a $49 gain for the investment in other income, net in the consolidated statements of operations upon gaining control.

The acquired business contributed net sales and net loss of $976 and $96, respectively, to the Company for the period from August 31, 2016 to December 31, 2016. The net loss for the period from August 31, 2016 to December 31, 2016 included integration-related costs and the negative impact of selling higher cost Axiall inventory recorded at fair value. The following unaudited consolidated pro forma information presents consolidated pro forma information as if the Axiall Merger had occurred on January 1, 2015:



	Pro Forma
	Year Ended December 31, 2016
Net sales	$	7,081

Net income ⁽¹⁾	$	397
Net income attributable to noncontrolling interests	23
Net income attributable to Westlake Chemical Corporation ⁽¹⁾	$	374
Earnings per common share attributable to Westlake Chemical Corporation:
Basic	$	2.88
Diluted	$	2.86

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(1)

The 2016 pro forma net income amounts include Axiall's historical charges recorded during the eight-month period prior to the closing of the Axiall Merger for (1) divestitures; (2) restructuring; and (3) legal and settlement claims, net, of $27, $23 and $23, respectively. These amounts have not been eliminated for pro forma results because they do not relate to nonrecurring transaction-specific costs related to the Axiall Merger.

The pro forma amounts above have been calculated after applying the Company's accounting policies and adjusting the Axiall results to reflect (1) the increase to depreciation and amortization that would have been charged assuming the fair value adjustments to property, plant and equipment and intangible assets had been applied from January 1, 2015; (2) the elimination of net sales and cost of sales between the Company and Axiall; (3) additional pension service costs; (4) amortization of debt premium and accretion of asset retirement obligations and environmental liabilities as part of the Company's adjustments to fair value; (5) incremental interest expense that would have been incurred assuming the financing arrangements entered into by the Company and the repayment of a portion of Axiall's outstanding debt had occurred on January 1, 2015; (6) the elimination of transaction-related costs; and (7) an adjustment to tax-effect the aforementioned pro forma adjustments using an estimated aggregate statutory income tax rate of the jurisdictions to which the above adjustments relate. The pro forma amounts do not include any potential synergies, cost savings or other expected benefits of the Axiall Merger, are presented for illustrative purposes only and are not necessarily indicative of results that would have been achieved if the Axiall Merger had occurred as of January 1, 2015 or of future operating performance.