Huntsman to Sell Intermediates to Indorama

12.08.2019 -

US chemical producer Huntsman has agreed to sell its chemical intermediates businesses to Thailand-based global polyester market leader Indorama Ventures for nearly $2.1 billion.

The sale, which is subject to regulatory approvals, includes PO/MTBE and the company’s surfactants businesses. Closing is expected late this year.

Comprised of a cash purchase price of $2 billion in addition o the transfer of some $76 million in net underfunded pension and other post-employment benefit liabilities, Huntsman said the deal represents an LTM-adjusted EBITDA multiple of approximately eight times.

Under the terms, Indorama would take over Huntsman’s manufacturing facilities in Dayton, Port Neches and Chocolate Bayou, all in Texas, as well as plants in Ankleshwar, India, and Botany, Australia.

Combined capacity of the production assets Indorama will acquire totals about 3 million t/y. Along with strengthening a main part of its PET feedstock supply chain (ethylene, EO and MEG), the Thai group will enter a number of new derivative product segments for the first time. These include propylene/PO derivatives, surfactants, ethanolamines, glycol ethers and MTBE.

CEO Peter Huntsman said his company will continue to work with Indorama as a customer and manufacturing partner through long-term commercial arrangements, including propylene oxide supply.

Selling the business, the CEO said, further transforms Huntsman’s balance sheet and accelerates its ability to expand downstream in fields complementary to its portfolio. By focusing more on the downstream and specialty businesses, he said the company will “generate more stable margins and consistent, strong free cash flow.”

After closing, Huntsman plans to accelerate share repurchases under its existing $1 billion multi-year authorization.

Aloke Lohia, Indorama’s Group CEO, called the acquisition “a momentous propellant in our journey towards our stated goal of being a global, diversified chemicals company with multiple, and related earnings streams.”

In a comment, Patrick Kirby, principal analyst at Wood Mackenzie, noted that Huntsman was historically a much larger player in the ethylene business, stemming major acquisition such as a large portion of ICI's base chemicals business. As the business to be sold was Huntsman's remaining ethylene asset following several divestments, the sale effectively ends Huntsman's production footprint for ethylene in the US and globally.” Kirby said.

Indorama recently restarted its cracker at Lake Charles, Louisiana, to provide full backward integration into ethylene for existing EO/glycol production in the US market. The addition of the Port Neches asset will expand its ethylene capacity in the US by around 50%, the analyst said.