Moody's Investors Service has noted the announcement made by Saudi Basic Industries Corporation (SABIC) that it has entered into an agreement with General Electric of the US to purchase the latter's GE Plastics business for a total consideration of USD11.6 billion subject to regulatory approvals. While expected to result in a material increase in the group's debt leverage in the short-term, Moody's believes that this cash and debt funded acquisition, can be accommodated within the current A1 rating given the significant financial flexibility currently enjoys by SABIC as a result of the strong free cash flow generated in recent years and taking account of the large capital expenditure programme to be executed by the group in the period through 2010. Moody's notes that it is SABIC's intention to put in place a new financing structure for the newly acquired entity. By positioning SABIC as a global leader in the fast growing engineering plastics sector, Moody's believes that the acquisition of GE Plastics, which generated revenues and EBITDA of USD 6.6 billion and USD 1.1 billion respectively in 2006, is clearly in line with management's strategy to further enhance the group's presence within the global chemical sector by broadening its product portfolio and developing specialty chemicals capabilities that should allow it to capture additional margin along the value chain.