Huntsman Paying $1.1 Billion in Cash for Rockwood Businesses

Andrew Klips |

Huntsman Corp. (HUN) , a global manufacturer and marketer of chemicals, said Tuesday that it has agreed to by the performance additives and titanium dioxide (TiO2) businesses of Rockwood Holdings Inc. (ROC) , the world’s largest producer of lithium products, for $1.1 billion in cash.  Huntsman will also assume the unfunded pension liabilities of the businesses, estimated at $225 million.

The businesses being sold include Titanium Dioxide Pigments, Color Pigments & Services, Timber Treatment Chemicals, Rubber/Thermoplastics Compounding, and Water Chemistry.  Applications for products made from the businesses are used in coatings, construction, concrete, plastics, papers, inks, food, cosmetics, pharmaceuticals, fibers and films, amongst other things.  Titanium dioxide is a key component in paint and industrial coatings.

Rockwood said that the businesses had combined net sales of $1.45 billion in 2012 and $1.54 billion in last twelve months ended June 30, 2013.

The deal, which is expected to close in the first half of 2014, is expected to be immediately accretive to Huntsman’s earnings and add 60 cents per share on an annual basis.  The profits estimate is assuming 2014 results and $130 million in annual cost savings that should be fully achieved by the end of 2015.

The acquisition will make Huntsman the second largest producer of titanium dioxide and inorganic color pigments in the world.  Huntsman says it plans to spin-out the combined pigments business through an initial public offering within two years.

"In addition to creating a $3 billion Pigments leader, we believe this public offering will allow greater investor focus and appreciation for our differentiated businesses,” said Peter Huntsman, president and chief executive of Huntsman Corp., in a statement today.

The sale is the latest in a string of non-core divestments at Rockwood as it focuses on its metal business.  In June, Rockwood agreed to sell its German ceramics unit CeramTec to European private equity firm Cinven for about $2 billion.  In July, the company sold its clay-based additives business to Germany-based specialty chemical maker Altana AG for $635 million. 

"With the sale of these businesses, we have successfully completed, ahead of schedule, all of our key objectives for 2013," said Seifi Ghasemi, chairman and CEO at Rockwood. 

Rockwood unveiled a plan in January with four main goals to grow shareholder value, including:  repurchasing $400 million in common stock (completed on Sept 5); a target dividend yield between 2.8 percent and 3.2 percent (quarterly dividend raised 28% to 45 cents per share); repaying up to $600 million in debt ($1.43 billion repaid); and launching a strategic process for non-core businesses (sold units for an enterprise value of approximately $3.9 billion).

Shares of Rockwood rose on Monday, when Reuters reported that three people close to the matter said a deal between Rockwood and Huntsman for the assets was nearly complete.  Shares of ROC have gained about 35 percent in 2013 and are essentially flat in pre-market trading on Tuesday.  Huntsman shares were up about 20 percent so far in 2013 through Monday’s close, but have skipped ahead 7 percent in limited pre-market activity to $20.50.

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Companies

Symbol Name Price Change % Volume
HUN Huntsman Corporation 19.53 0.26 1.35 2,274,071
PLTYF Plastec Technologies Ltd. 4.00 0.00 0.00 0

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