Huntsman Grabs Rockwood’s Titanium Dioxide Unit

Continuing a shakeup in the titanium dioxide pigment industry, Huntsman Corp. has agreed to acquire Rockwood Holdings’ business in TiO₂ and several other chemicals. Huntsman plans to combine the Rockwood pigment business with its own TiO₂ operation and then unload the combination in a public stock offering by 2016.

The purchase will cost Huntsman $1.1 billion plus $225 million in Rockwood pension obligations. The businesses employ about 3,300 people worldwide and had sales last year of $1.5 billion. Earnings before taxes were $105 million.

The deal includes operations in iron oxide pigments, wood preservatives, water treatment chemicals, and elastomers, but titanium dioxide, at 66% of sales, is clearly the focus. By combining the Rockwood titanium dioxide business with its own, Huntsman will create the world’s second-largest TiO₂ producer after DuPont.

TiO₂, a white pigment added to almost every can of paint, has become something of a hot potato for Huntsman, Rockwood, and DuPont—a commodity chemical that does well in good times and horribly in bad times, like those of the past decade. Earlier this year, Rockwood bought out its partner, Kemira, in the business so it could arrange its exit more easily. And DuPont recently decided to divest its performance chemicals division, the largest piece of which is titanium dioxide.

Huntsman CEO Peter Huntsman said now is a good time to engineer a transaction in titanium dioxide. “We anticipate TiO₂ demand will continue to recover in the coming quarters,” he told investors, promising that combining the two businesses will yield $130 million in annual cost savings. The company will then “further unlock value” through the stock offering, the CEO said.

Stock analysts see logic in the plan. John Roberts at UBS Securities called the acquisition yet another in Huntsman’s long history of “bottom of the cycle” deals. At Jefferies & Co., analyst Laurence Alexander said the transaction is “classic Huntsman: a fixer-upper of a quasi-commodity.”

For Rockwood, the sale is the latest in a string of divestments that have brought in proceeds of close to $3.5 billion and shrunk the company to about one-third of its former size. By the time the sale to Huntsman is done, Rockwood will consist only of businesses in metal treatment and lithium chemicals.