Huntsman buying Rockwood’s pigments and considers IPO

US public-listed chemicals firm Huntsman is acquiring Rockwood Holding’s Performance Additives and Titanium Dioxide (TiO2) businesses at US$1.1 billion in cash and unfunded pension liabilities estimated at US$225 million, with the deal expected to close next June. Through this acquisition, Huntsman will become the second largest global producer of TiO2 and inorganic colour pigments (after DuPont), with a global capacity of 16%, up from its current 10%.

According to a Reuters report, Peter R. Huntsman, President/CEO, says that Huntsman plans to spin off roughly 20% of the combined pigments business in an initial public offering (IPO) within two years of closing the deal. Huntsman will retain a majority stake in the new pigments business.

Huntsman anticipates TiO2 demand will continue to recover in the coming quarters, and said that during this time the firm will be focused on strengthening its world class Pigments business and capturing approximately US$130 million in expected annual cost savings, to be fully achieved by the end of 2015. After the deal, the Americas region is expected to account for more than a fifth of Huntsman's annual pigments sales, while Europe could account for about half, the company said. The titanium dioxide industry will sell about 5.3 million tonnes this year, as much as was sold in 2007, according to Huntsman in the report.

In addition to creating a US$3 billion Pigments leader, the firm says the IPO will allow greater investor focus and appreciation for its differentiated businesses. These remaining divisions continue to enjoy record financial performance and global growth. “We are well on our way to capturing the previously announced US$220 million in annual savings through restructuring in our existing business and we have a number of capital projects underway that will increase our future earnings potential. Reducing our financial leverage remains a priority and we expect to return to our debt/EBITDA target ratio of 2 to 2.5 times by 2015,” added Huntsman.

The cash purchase price of US$1.1 billion represents a multiple of 5.5 times estimated 2014 adjusted EBITDA of US$200 million, or 3.3 times including US$130 million in expected annual cost savings. The transaction will be immediately accretive to earnings per share, and is expected to add US$0.60 annual per share accretion assuming 2014 estimated results and full impact of expected cost savings.

The other businesses that Huntsman is buying include the thermoplastic (plastics and PU) and rubber compounding unit that sells primarily to the European automotive market. Another two businesses being acquired by Huntsman are on timber treatment chemicals and water chemistry. It will also buy Rockwood’s sulphate process for TiO2, which is a lower cost alternative to using chloride to produce the pigments.

Rockwood, which is narrowing its focus to lithium production as demand for rechargeable batteries in mobile devices grows, also recently sold its industrial ceramics unit for US$2 billion and clay-based additives business for US$635 million. Nevertheless, TIO2 was Rockwood’s largest business unit in 2012, churning out a turnover of US$900 million, or 25% of total company sales.

(PRA)


Home | Terms & Conditions | Privacy Policy | Contact | Webmail | Site Map

Copyright (c) 2013 www.plasticsandrubberasia.com. All rights reserved.