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Huntsman Rejects Takeover Offers

Company says the proposals do not reflect its true value

by Alexander H. Tullo
February 13, 2006 | A version of this story appeared in Volume 84, Issue 7

Credit: Huntsman Photo
Peter Huntsman
Credit: Huntsman Photo
Peter Huntsman

Huntsman Corp. has ended talks with all parties that have offered to purchase the chemical company, saying that "none of the proposals were in the best interests of the shareholders."

On Jan. 31, the day that published reports indicated Huntsman was entertaining offers from private equity firm Apollo Management, Huntsman's stock price jumped 11% to $21.62. Later that day, the company acknowledged it was discussing proposals that were presented late last year by unnamed suitors.

Huntsman had an initial public offering about a year ago at $23 per share. The firm's stock got off to a fast start, hitting a high of $30 in less than a month. However, its shares floundered and slipped to a low of $16.50 in September after Hurricanes Katrina and Rita hit the Gulf Coast.

Jon M. Huntsman, the company's founder and chairman, says the recent offers are unsatisfactory. "While the last proposals were above the price of our IPO last year, I believe they were not adequate, particularly in light of the risks, uncertainties, and extended timing of the proposed transactions," he says.

CEO Peter R. Huntsman says the hurricanes will cost the company about $140 million before taxes in the fourth quarter of 2005 but adds that they won't have much impact in 2006. "We are enthusiastic about the global opportunities and prospects we see for 2006 and beyond, including expanding our differentiated business and possible divestitures to accelerate our debt reduction," he says.

Huntsman's shares were pummeled immediately after it rejected the takeover offer over the weekend. After closing on Friday, Feb. 3, at $22.95 per share, they opened on Monday, Feb. 6, at $20.84 per share.

Sergey Vasnetsov, a chemical stock analyst with Lehman Bros., says Huntsman shares were trading at a fair price before the company acknowledged the offers. He explains that a private equity buyer may be able to extract value from Huntsman by refinancing its debt and breaking it into specialty and commodities units, but a buyer wouldn't be able to boost the value much above the $23 IPO price.



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