The chief executive of Huntsman Corp. said Wednesday that The Woodlands company plans to spin off its specialty chemical business – rather than sell it – and create a new publicly traded company by early next year.
After debating for many months which route to take, CEO Peter Huntsman said now that the struggling pigments and additives business is becoming profitable again – “back in the black” – his company can gain more value by spinning off the unit and selling shares than by selling it outright. The new company would focus specifically on titanium dioxide chemical, called TiO2, which is used as a pigment for everything from food coloring and paints to coatings and sunscreen.
“A spin allows us to have a process that we can control,” Huntsman said, noting that shareholders should benefit. “This is something that has greater certainty behind it.”
Huntsman has sought to unload, or at least distance itself, from the titanium dioxide business because its poor performance has weighed on Huntsman’s stock price.
Hassan Ahmed, a chemical industry analyst of New York-based Alembic Global Advisors, said spinning off the unit could prove wise because the titanium dioxide business is cyclical and makes investors wary of Huntsman. In addition, the new company might be attractive to investors now because the pigments industry is out of the cyclical trough, he said.
“Giving a timeline – rather than some pie-in-the-sky thing – is better than expected,” Ahmed said of the spinoff.
Last year was termed a transition year for Huntsman after the 2014 purchase of $1 billion in plants and other assets from Rockwood Holdings, a chemical company owned by Albemarle Corp. of Charlotte, N.C. Huntsman’s biggest financial drag has been its titanium dioxide plants, some of which were purchased from Rockwood. Huntsman is in the process of closing its smallest titanium dioxide plant, which is in South Africa.
The company began eliminating at least 900 jobs last year, most of them at three titanium dioxide manufacturing plants in Germany and Finland.
Huntsman, which employs more than 1,000 people in the Houston area, has dual headquarters in Texas and Utah, which is the seat of the Huntsman family dynasty in Utah. Peter Huntsman’s brother, Jon, is a former Utah governor and GOP presidential candidate.
Huntsman Corp. reported that its profit for the second quarter tripled from the same period a year earlier, due in part to cost cutting. Profit rose to $87 million from $29 million in 2015, even though the specialty chemical company’s revenue fell to $2.5 billion from $2.7 billion last year.
Despite the profit, Huntsman’s net earnings are below its historic norms. Huntsman’s stock fell Wednesday to $15.61 per share, down 50 cents.
By Jordan Blum
Source: Houston Chronicle
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