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Huntsman Corp. will be going private, but it's not clear anymore which company will take it there.
The Salt Lake City-based chemical maker announced late on July 3 that Hexion Specialty Chemicals had made an offer to acquire it for $27.25 per share, or about $10.4 billion including debt. The deal represents an 8% premium over the $25.25-per-share offer that Basell made for Huntsman late last month (C&EN, July 2, page 5).
The offer seemed to take the stock market by surprise. Huntsman's shares closed before the July 4 holiday at $24.40, indicating that stock traders hadn't expected a competing bidder to come forward.
In keeping with an emerging trend in the chemical industry, both Hexion and Basell are private companies backed by owners with access to large amounts of low-interest financing. Hexion is a thermoset resins company assembled in 2005 by the private equity firm Apollo Management out of assets picked up from Eastman Chemical, Shell Chemicals, and other companies. It had sales last year of $5.2 billion.
Basell, with 2006 sales of about $14 billion, is owned by Access Industries, a New York City-based company founded by Russian-born industrialist Len Blavatnik. Access acquired Basell in 2005 from BASF and Shell.
Both Apollo and Access have been on the prowl for other chemical businesses. Apollo reportedly made an offer to take Huntsman private in early 2006, although Chairman Jon M. Huntsman rejected it at the time as not being in shareholders' interests. Access, meanwhile, bid earlier this year to acquire GE Plastics, and it recently obtained an option to purchase 8.3% of Lyondell Chemical.
Huntsman's board of directors says it has concluded that the offer from Hexion "could reasonably be expected to lead to a superior proposal" to the one from Basell. The board adds that the agreement with Basell allows the deal to be terminated if Huntsman gets a better offer. In that case, Basell will be entitled to a $200 million payment, of which Hexion has agreed to pay half.
Laurence Alexander, a stock analyst who follows Huntsman for investment banking firm Jefferies & Co., pointed out in a research note to clients that Hexion promises more synergies with Huntsman than does Basell. Hexion's thermoset resins portfolio fits well with Huntsman Advanced Materials, a leading producer of epoxy resins, he noted, and Huntsman's polyurethanes line would be a complementary product platform.
Basell, on the other hand, mainly produces polypropylene and polyethylene and licenses polyolefin manufacturing technology to other firms. Huntsman recently concluded a divestment program to rid itself of most of its polyolefins businesses. Alexander said a quick calculation suggests that Basell could afford to at least match Hexion's offer but that Hexion could go up to nearly $31 per share. Basell hasn't commented on its plans.
Whichever company ends up with Huntsman, the transaction will signal the growing power of private owners in the chemical industry today. Another deal announced over the Independence Day holiday is the planned acquisition of Taminco by the private equity firm CVC Capital Partners for close to $1.1 billion.
Like Hexion, Taminco was assembled from assets that were unwanted by traditional chemical companies, in this case amines businesses from Air Products & Chemicals, UCB, and Arkema. Taminco is expected to have sales this year of more than $800 million.
Private equity owners generally take their chemical businesses public, as was the case in recent years for Rockwood Specialties Group, Nalco, and Celanese. In fact, Hexion was created with the goal of a stock offer, but Apollo postponed the plan in 2006.
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