BASELL HAS AGREED to acquire Huntsman Corp. in a $9.6 billion transaction that will create one of the world's largest chemical companies, with annual sales of more than $26 billion. The deal both marks the end of a long run for the Huntsman family as an industry player and shows how private owners are becoming a potent force in the chemical enterprise.
Netherlands-based Basell, the world's largest producer of polypropylene, will pay $25.25 per share, or about $5.6 billion, for Huntsman. Basell will also assume close to $4 billion in Huntsman debt. Investment group MatlinPatterson and the Huntsman family, which collectively own 57% of Huntsman's stock, have agreed to the deal.
Basell, which had 2006 sales of about $14 billion, is owned by Access Industries, a private New York City-based company founded by the Russia-born industrialist Len Blavatnik. Access acquired Basell in August 2005 from BASF and Shell, which had created the joint venture by pooling their polyolefins activities.
Access' continued interest in the chemical industry became clear earlier this year when it bid to purchase GE Plastics, which in the end was acquired by Saudi Basic Industries. Then in May, Access obtained an option to purchase 8.3% of Lyondell Chemical.
In Huntsman, Access is getting an entrepreneurial company formed in 1970 by former Dow Chemical executive Jon M. Huntsman. Striking out on his own in the polystyrene industry, Jon Huntsman embarked on a four-decade roller-coaster ride fueled largely by acquisitions. Although he flirted with bankruptcy, Huntsman succeeded in expanding his company into a global player that had sales last year of $13.1 billion.
Huntsman itself was private for most of its history, but in 2005, the company agreed to go public to aid MatlinPatterson's desire to cash out. The company debuted on the New York Stock Exchange that February at $23 per share. Its share price soon shot up to $30 but later fell below the launch price, where it has languished.
In early 2006, Huntsman's shares spiked after the firm revealed discussions with unnamed suitors; they fell back when Jon Huntsman said a takeover was not in the best interest of shareholders. The company's shares closed at $18.90 on Monday, June 25, the day before the deal was announced.
Ironically, Jon Huntsman and his son, CEO Peter R. Huntsman, are selling the company to a polyolefin maker just months after divesting most of their plastics assets to focus on specialty chemicals. Now, points out Laurence Alexander, a stock analyst with Jefferies & Co., "the acquisition will create the kind of petrochemical/specialty hybrid that Huntsman dismantled by selling its polyolefin businesses."
Alexander says the sale to Access highlights a trend in which commodity chemical firms, particularly those controlled by private equity owners, pursue specialty chemical assets to reduce cyclical risk. He sees specialties firms such as Hercules, Cytec Industries, and Omnova Solutions as takeover candidates.
As for Jon and Peter Huntsman, it's not yet clear what role they will play in the new Basell. An Access spokesman says Basell head Volker Trautz will be CEO of the enlarged organization.
Jon Huntsman told reporters last week that the sale will yield nearly $1.5 billion in cash for his family and that he has already transferred $600 million in stock to the Huntsman Cancer Foundation. "The proceeds of this transaction will allow our family to focus more effectively on the elimination of human suffering and on finding cures for cancer," he said.