Huntsman Corporation (HUN - Free Report) announced that it completed the divestiture of its chemical intermediates businesses, including PO/MTBE, and its surfactants businesses to Indorama Ventures. The company announced the deal in August 2019.
The transaction is valued at around $2 billion, which comprises a cash purchase price of $1.93 billion along with the transfer of up to $76 million in net underfunded pension as well as other post-employment benefit liabilities. Notably, the cash purchase price includes estimated adjustments to the working capital purchase price.
The final purchase price is subject to customary post-closing adjustments. Further, net cash proceeds are expected to be just below $1.6 billion.
Per Huntsman, the transaction significantly lowers its capital-intensive upstream asset base, strengthens its already strong balance sheet, and enables it to further invest and expand its downstream businesses. Moreover, the transaction expands the company’s opportunity and flexibility for select strategic and accretive acquisitions, and ongoing opportunistic repurchases of its shares.
Notably, the company, in August 2019, noted that the divestiture will enable it to generate more stable and consistent margins as well as strong free cash flow.
Huntsman's shares have gained 11.7% in the past year against the industry’s 21.2% decline.
The company expects consistently stable differentiated margins for its Polyurethanes unit. It anticipates witnessing demand-related headwinds in major markets across the globe. Also, component MDI (methylene diphenyl diisocyanate) margins are expected to be under pressure.
For the Performance Products segment, Huntsman anticipates growth in key specialty amines. It also expects maleic anhydride to see some demand-related headwinds but anticipates margins to remain stable. Lower margins and volumes are expected to exert pressure on ethyleneamines.
For Advanced Materials, the company expects stable overall margins amid demand headwinds across most industrial markets.
For the Textile Effects unit, Huntsman expects to witness persistent pressure from unresolved global trade issues as well as weak global demand.
Huntsman Corporation Price and Consensus
Zacks Rank & Stocks to Consider
Huntsman currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the basic materials space are Daqo New Energy Corp. (DQ - Free Report) , Pan American Silver Corp. (PAAS - Free Report) and Sibanye Gold Limited , each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Daqo New Energy has projected earnings growth rate of 294.7% for 2020. The company’s shares have rallied 105% in a year.
Pan American Silver has an estimated earnings growth rate of 38.1% for 2020. The company’s shares have gained 55.3% in a year.
Sibanye Gold has a projected earnings growth rate of 587.5% for 2020. The company’s shares have soared 248.1% in a year.
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