InterviewHuntsman makes Tronox bid at market bottom - CEO

31 August 2009 19:47  [Source: ICIS news]

By Joseph Chang

NEW YORK (ICIS news)--US chemical major Huntsman’s bid for Tronox’s titanium dioxide (TiO2) assets is “a great buy at the bottom of the market”, CEO Peter Huntsman said on Monday.

“This will be accretive to our operating earnings and cash flow from day one, and we will be able to generate substantial synergies,” Huntsman said in an interview with ICIS.

Synergies are estimated at $50m-100m (€35m-70m) over the next two to three years and could include plant closures, according to Jefferies & Co analyst Laurence Alexander.

Huntsman has agreed to buy a set of Tronox’s assets for $415m. These includes TiO2 facilities in the Netherlands and the US (excluding Savannah, Georgia), a 50% stake in a TiO2 plant in Australia and associated mining operations and electrolytic production facilities in the US.

The deal also includes Tronox’s sodium chlorate, boron derivatives and other specialty businesses. Total sales of the assets to be acquired amount to around $1.2bn, Huntsman said.

“There were multiple interested parties [in Tronox’s assets], including private equity firms and strategic players,” Huntsman said.

However, in the bankruptcy process, other parties will be able to bid for the assets in the coming months, he added.

Tronox filed for bankruptcy protection in the US on 12 January.

Huntsman will not be assuming any of Tronox’s legacy environmental liabilities in the deal, Huntsman said.

“We are not going to take on any environmental liabilities in this deal. That’s also why we’re leasing the land in Henderson [Nevada] rather than buying it,” he said.

Tronox had an environmental reserve provision of $24.3m for its Henderson site, indicating its estimate for remediation, at the end of the third quarter of 2008.

“Huntsman would not be taking Tronox’s legacy environmental liabilities, which should sharply reduce the cost of closing capacity (we estimate under $50m per plant),” Jefferies analyst Alexander said in a research note.

Huntsman plans to finance about half the $415m acquisition price with debt.

“$200m in additional debt should not be a problem for us, our lenders or shareholders, as we are picking up an accretive asset at a good time,” Huntsman said.

“It’s great to be back in a position where we’re buying instead of sitting in a courtroom all the time,” he added, referring to Huntsman’s now-resolved court battles with would-be buyer Hexion Specialty Chemicals and banks Deutsche Bank and Credit Suisse.

Shares of Huntsman were up 27 cents, or 3.2%, to $8.62 in early afternoon trading.

($1 = €0.70)

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By: Joseph Chang
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