Huntsman deal could add jobs, CEO says
The merger of The Woodlands chemical maker Huntsman Corp. into a larger global company likely would create more Houston-area jobs even as the headquarters moves overseas to Switzerland, Chief Executive Peter Huntsman said Monday.
Huntsman and Swiss specialty chemicals company Clariant said they plan to combine into the world’s second-largest specialty chemical company, valued at about $14 billion. The formal headquarters for HuntsmanClariant would be in Clariant’s hometown of Pratteln, Switzerland, in part for tax purposes, while The Woodlands would become the North American headquarters for the combined company.
They plan to create $400 million in annual costs savings through the deal, but Huntsman said closing some locations
closing some locations probably means moving more people to the Houston-area hub. “We may consolidate more into The Woodlands,” Peter Huntsman said in a phone interview.
Huntsman employs about 1,000 people in The Woodlands, plus a few hundred more workers in regional manufacturing facilities in Houston, Conroe, Alvin, Dayton, Port Neches and Freeport. Peter Huntsman would become the CEO of the combined company with Clariant chief Hariolf Kottmann as the chairman. Huntsman’s father, Jon Sr., who founded the company, becomes chairman emeritus.
The all-stock deal culminates a casual on-again, off-again flirtation that has gone on for about eight years, Huntsman said. In the past, the timing was never quite right because of other pending deals, or because they were moving in different directions as one bought while the other sold assets.
Both companies have grown to about same size — each valued near $7 billion apiece — and both have considered mergers or acquisitions to move into the next stratosphere of the industry. The talks only picked up about two months ago and nearly all of the details were completed just this month, Huntsman said.
Second in the world
Once the deal closes, the combined company will trail only Germany’s Evonik Industries, which has a stock market value of more than $16 billion, in the specialty chemical sector. Evonik has a growing Houston-area presence in Pasadena and Deer Park.
The proposed HuntsmanClariant would make everything from oil and gas drilling fluids to automotive, construction and clothing materials, bringing together complementary than overlapping products. Clariant, for example, is well known for specialty paint. So, Huntsman could make the plastics for the chassis of a vehicle, while Clariant provides the paint coatings.
The deal is “about as close to a merger of equals as you can get,” Huntsman said. In the all-stock deal, Clariant shareholders would control 52 percent of the combined company in the all-stock deal. The companies will have an equal number of seats on the board of directors.
In a conference call, Kottmann said he’s convinced the specialty chemicals industry will consolidate into just six or so giant companies within five years and called the merger a way to get ahead of the trend.
He said HuntsmanClariant, with a combined 30,000 workers, would be more than the sum of its parts — “not just Huntsman on steroids, nor is it a larger Clariant.”
Matthew Blair, an energy analyst for Tudor, Pickering, Holt & Co., said this merger of equals, could create an awkward mishmash of executives forced together from different continents and a challenge to combine the cultures of the two companies. But he added the deal would boost market share and the longterm potential for earnings.
Ben Gomes-Casseres, director of the Asper Center for Global Entrepreneurship, said it’s a case of two companies — neither of whom is large enough to truly swallow the other — coming together to build a stronger foothold in a industry rapidly consolidating into specialized niches.
For instance, Dow Chemical and DuPont are merging, but then splintering off into three separate specialized businesses. Bayer is acquiring Monsanto to form an agriculture chemicals juggernaut. And Pittsburgh-based paint maker PPG Industries is trying to take over Dutch rival Akzo Nobel.
Huntsman and Clariant aim to dominate in niche specialty chemicals. “If we wanted to just go for size, we would merge with an oil company,” Peter Huntsman said.
Specialty chemicals
For its part, Huntsman employs for about 15,000 people in more than 30 countries. A decade ago, Huntsman agreed to be taken over by chemical maker Hexion and its private equity firm owner, Apollo Management, but Apollo later backed out and the engagement ended in a messy court settlement.
Since then, Huntsman has increasingly focused on more specialty chemicals, materials and products with higher profit margins and away from commodity chemicals and plastics.
“Anybody that knows our history knows we shouldn’t shy away from either acquisitions or a purchase,” Peter Huntsman said.
Huntsman is in the process of spinning off part of its company, primarily its pigments business, into a separate publicly traded entity, called Venator Materials Corp. The name comes from the Latin word for hunting to maintain the Huntsman family legacy.
The merger won’t have any effect on Venator, Huntsman said. Proceeds of the spinoff will simply go toward debt reduction, he said.
Venator will primarily house its division that makes titanium dioxide, a chemical used to make pigments for paints, food coloring and other products.
After Huntsman went public in 2005, Peter Huntsman moved the family business from Utah, where it was founded, to The Woodlands, where it would be closer to its plants, customers and supplies of natural gas that provide the feedstock for petrochemicals.
The company hit it big more than more than 40 years ago making the cheap, plastic “clamshell” containers for McDonald’s Big Mac burgers.