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Huntsman Confirms Buyout Talks

Firm says it has held discussions with potential suitors; other deals are rumored

by Marc Reisch and Patricia Short
February 6, 2006 | A version of this story appeared in Volume 84, Issue 6

Going Private?
Credit: Huntsman Photo
Huntsman makes polyurethane intermediate propylene oxide in Port Neches, Texas.
Credit: Huntsman Photo
Huntsman makes polyurethane intermediate propylene oxide in Port Neches, Texas.

Commodity chemicals maker Huntsman Corp. confirmed last week that it has held talks with a number of entities about the sale of its business. The firm admitted to the talks with unnamed suitors following news reports that it was discussing a $4.3 billion transaction with the buyout firm Apollo Management.

Huntsman says that in late 2005, it received "an indication of interest regarding an acquisition of all the outstanding stock of the company." Huntsman will not name the original suitor but says it subsequently contacted and obtained proposals from other potential acquirers or merger partners.

Shares of Huntsman rose 11% to $21.62 on Jan. 31 following reports of a potential sale. Huntsman first offered shares to the public in February 2005 at $23 a share. MatlinPatterson Asset Management, which rescued Huntsman from a potential bankruptcy filing in October 2002, did not sell shares in that offering. It now owns a substantial number of Huntsman shares and is rumored to be looking for a way to monetize its investment.

The fact that another private equity firm, Apollo, has come up as a possible buyer for Huntsman underscores the ready availability of private investment capital, points out Kyle Loughlin, an analyst with credit rating agency Standard & Poor's. He adds that ratings on Huntsman's debt could be lowered "given the strong expectation that Apollo or other potential financial buyers would use a significant amount of debt in any financing plans."

Eric Terhorst, vice president of investment banking firm First Analysis, notes that private equity firms like Apollo need a "liquidity event," such as the sale of a business to the public or another buyer, to close out an investment. For instance, First Analysis participated as comanager in the just-completed $140 million public offering of Koppers Holdings. The deal allowed private equity firm Saratoga Partners to redeem about half its shares in the treated-wood and carbon products firm.

In Europe, meanwhile, industry analysts say two more major chemical businesses may be changing hands soon.

Private equity firm Charterhouse Capital has put a price tag of about $2.5 billion on acrylics specialist Lucite, some reports say. Charterhouse executives do not speak to the press, a source says. But other sources indicate that the private equity firm has engaged Deutsche Bank to sell the company, after receiving several unsolicited bids to buy Lucite.

Lucite has sales running at about $1.5 billion per year on methacrylate monomers and acrylic polymers. The company, which claims a 25% global market share in methyl methacrylate, plans to build a plant in Singapore, due onstream in 2007, that will feature its new technology for making the monomer.

And ICI is reportedly weighing the sale of its surfactants arm, Uniqema. If the report is true, Uniqema, too, could find its way into the hands of a private equity firm. Uniqema's sales in 2004, the latest year available, were about $1.13 billion, 11% of ICI's total, with operating profit of roughly $34 million, 4% of the total. ICI refused to comment on the subject.


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