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Huntsman Readies Corporate Split

Chemicals maker will buy Ciba textile chemicals in prelude to breakup

by Michael McCoy and Alex Tullo
February 27, 2006 | A version of this story appeared in Volume 84, Issue 9

Credit: Ciba Specialty Chemicals photo
This Ciba dyes plant in Switzerland is set to become part of a new Huntsman specialties company.
Credit: Ciba Specialty Chemicals photo
This Ciba dyes plant in Switzerland is set to become part of a new Huntsman specialties company.

Huntsman Corp. has agreed to acquire Ciba Specialty Chemicals' textile effects business for $253 million. The purchase, expected to be complete by the third quarter, will bolster Huntsman's performance products business and set the stage for a split of the company into separate commodity and specialty firms.

The textile effects business had sales last year of about $1 billion, some 17% of the Swiss company's total revenues. It employs 4,200 people and operates plants in eight countries that make dyes and other specialty chemicals used by the textile industry.

Ciba decided in August 2005 to evaluate its options for the business, which has experienced several years of flat or declining sales and profits in the wake of textile industry migration to Asia. With the sale, Ciba CEO Armin Meyer says, the company will concentrate on its core businesses in plastics additives, coatings effects, and water and paper treatment.

For Huntsman, the purchase-at the seemingly bargain price of only about a quarter of annual sales-continues a buildup in performance chemicals. One such move was the 2003 acquisition of Vantico Group, Ciba's former epoxy resins operation. Now called Huntsman Advanced Materials, this business will share sites in Basel, Switzerland, and Panyu, China, with the textile effects unit.

Although textiles have been a trouble spot for multinational chemical makers, Huntsman CEO Peter R. Huntsman puts a positive spin on the deal, noting that it will bring his company some $360 million in Asian revenues. "We believe the global demand for textile solutions will continue to grow, and there remain significant opportunities," he says.

The textile chemicals purchase is the second recent corporate maneuver for Peter and his father, Huntsman Corp. founder and chairman Jon M. Huntsman. Less than a month ago, the company revealed that it was in discussions to be acquired, only to announce just days later that the takeover talks were off.

Now, in an alternative move meant to enhance shareholder value, Huntsman is planning to split off its commodities business as a separate company traded on the New York Stock Exchange. Jon Huntsman tells C&EN that the firm's commodities business, which presently constitutes 25% of earnings before taxes, has weighed down the valuation of Huntsman Corp. stock.

The specialties company, he says, would have nearly $9 billion in annual sales of polyurethanes, epoxy resins, the new Ciba business, specialty amines, and titanium dioxide. The commodities business, with more than $6 billion in annual revenues, would include polyethylene, polypropylene, expandable polystyrene, aromatics, and the company's 2 million metric tons per year of ethylene capacity.

"They would be two self-sustaining, independent companies," Jon Huntsman says. "One should have a commodity valuation and the other a specialty valuation. I believe this separation enhances shareholder value." He adds that the separation would create two businesses that would focus on their respective strengths.



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