The Woodlands, Texas – Huntsman has sold its chemicals & intermediates business to Indorama Ventures for $2.1 bn. This is about nine times more than the EBITDA generated by the business in the past 12 months.
The sale involves three sites in Texas, one in India and another in Australia.
Peter Huntsman explained the deal’s logic in a call with financial analysts. ‘It gives money for investments in R&D, and allows us to invest in business that will give more stable income,’ he said.
‘[The company’s] number one priority is a strong balance sheet,’ he added. ‘I don’t feel we have to go out and do something aggressive or reckless. We don’t have to prove that we can spend as quickly as we can sell. We will take a very prudent approach to acquisitions.’
He added that the company wants to ensure there are opportunities for synergies, and that they will add to earnings very quickly. ‘It took us years to get to this point, where we have this balance sheet,’ he said. ‘We need to be very smart with it.’
He hinted at areas of special interest. ‘There is an overlap between the coatings, adhesives and elastomers business,’ he said. ‘Certain acquisitions in those three areas… could fill some of the voids between our downstream epoxies, urethanes and our amines businesses. I see a lot of opportunity.’
He added that they will go wherever there is the opportunity to create value. However, he ruled out starting a new leg of the business.
The chemicals & intermediates business was taking capital that could be spent in areas, like polyurethanes, that could make the company more money, he explained.
‘When you start diverting money away from good projects into your intermediates and base businesses, that’s when you start to see that this business is probably more valuable in someone else’s hands,’ he said.
There is a greater return to be had on building and equipping systems houses, including one in North China. He also mentioned that the company is recycling 1 billion PET bottles into polyester polyols.
‘We are going to have a greater focus on our downstream business,’ he said. ‘We will become more dependent on those businesses.’