Huntsman TiO2 spin-off advances; will retain textile effects

January 17, 2017

Huntsman Corporation today filed updated forms with the US Securities and Exchange Commission related to the proposed spin-off of its titanium dioxide (TiO2) business, including pigments and additives.

The new company will be called Venator Materials Corporation, and the spin-off remains on track to be complete during the second quarter of this year.

Meanwhile, Huntsman said it will retain its textile effects business, which was originally included in the spin-off. The textile effects business makes dyes and other chemicals for the textiles sector. The textile effects business reported $804 million in revenue during 2015, the most recently available full-year data.

During a conference call this morning, Huntsman CEO Peter Huntsman declined to comment on Huntsman long-term plans for textile effects. “Looking at the businesses we are in today…the dyes and textile chemicals industry probably has the greatest opportunity for consolidation and M&A transactions,” Huntsman told investors during the call. “I certainly would not say it is noncore but we will continue to explore value-enhancing opportunities for textile effect. That includes keeping the business.”

The company has recently boosted textile effects’ EBITDA margin into the mid-teens percent range, in line with a goal announced “a couple of years ago,” according to Huntsman. “We don’t see a need for textile effects to be in Venator,” he adds.

Venator, meanwhile, will operate in two segments – TiO2 and performance additives, with about $1.53 billion and $572 million in pro forma annual revenue, respectively. About 43% of Venator’s sales will be in Europe, and key customers include paint makers such as AkzoNobel and PPG, as well as masterbatch firms such as A. Schulman.

Pricing recovery in the TiO2 sector has improved Venator’s business prospects, according to Huntsman. “TiO2 prices have steadily improve through 2016,” Huntsman notes. TiO2 prices went up by about $300/m.t. through the course of 2016, Huntsman says. This improvement is expected to continue in 2017, and the company is pushing through a price increase this quarter, it adds.

Huntsman also says it has identified “business improvement opportunities” for Venator worth around $75 million/year in EBITDA. These are related to cuts in fixed costs and manufacturing, as well as TiO2 market improvement. Venator should see volumes improve after the spin in a “modest growth environment,” according to Huntsman.

Huntsman Corporation expects to retain a significant financial stake in Venator, which CEO Huntsman said could be up to 40%. However, it will not retain more than 19.9% of voting power in the new company, to maintain the tax-free nature of the spin-off. Venator shares are expected to be listed on the New York Stock Exchange (NYSE) under the ticker symbol ‘VNTR.’

Venator’s CEO will be Simon Turner, currently division president/pigments at Huntsman. Peter Huntsman is expected to be Venator’s board chairman. Kurt Ogden, currently Huntsman’s v.p./investor relations and finance, will be Venator’s CFO, while Russ Stolle, currently Huntsman’s deputy general counsel, will be its general counsel. Other executives and board members will be announced as the spin-off progresses.

By Vincent Valk

Source: Chemical Week