Huntsman Corporation (HUN - Free Report) completed the acquisition of Icynene-Lapolla from an affiliate of FFL Partners, LLC. Notably, the deal was valued at $350 million in an all-cash transaction financed from available liquidity, subject to customary closing adjustments. The purchase price suggests an adjusted EBITDA multiple of 10 times or adjusted EBITDA pro forma of 7 times for synergies.
Icynene-Lapolla is a leading North American manufacturer and distributor of spray polyurethane foam (SPF) for commercial and residential use. It has annual revenues of around $230 million, with two manufacturing facilities in Houston, TX, and Mississauga, Ontario.
Per Huntsman’s management, the acquisition is in sync with its strategy of expanding its downstream polyurethanes business. The acquisition will likely boost its portfolio of leading energy-saving insulation applications and technologies, and provide customers with an unparalleled product offering. Further, the acquisition is expected to generate significant synergies.
The combination of Icynene-Lapolla with Demilec (acquired by Huntsman in 2018) is expected to create the world's leading supplier of spray foam products. It is also expected to provide highly innovative energy-saving solutions for owners of residential and commercial properties.
The acquisition is also expected to provide an impetus to the globalization of the SPF technology. Notably, the combined business is now witnessing close to $500 million in revenues. With synergies, Huntsman expects the SPF business to exceed $100 million in EBITDA by the end of 2021.
The company's shares have dipped 16.1% in the past year compared with the industry’s 29.8% decline.
On the fourth-quarter earnings call, Huntsman stated that it will remain focused on investing in its downstream and specialty platforms in 2020, both through acquisitions and organically. It will also remain balanced in its capital allocation, including opportunistic share repurchases and maintaining a competitive dividend payout.
For the Polyurethanes unit, the company expects demand headwinds in several major markets and regions in 2020. It also anticipates differentiated MDI margins to be stable.
For Performance Products, Huntsman sees growth in performance amines. It also expects weak maleic anhydride demand, with stable margins.
For Advanced Materials, the company expects stable overall margins amid weakness in industrial markets and demand headwind in aerospace.
For the Textile Effects unit, Huntsman expects growth in specialty products. It also expects stable volumes and improved margins.
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) , Commercial Metals Company (CMC - Free Report) and NovaGold Resources Inc. (NG - Free Report) .
Daqo New Energy has a projected earnings growth rate of 353.7% for 2020. The company’s shares have rallied 95.1% in a year. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Commercial Metals currently has a Zacks Rank #2 (Buy) and a projected earnings growth rate of 20.7% for 2020. The company’s shares have rallied 22.9% in a year.
NovaGold has a projected earnings growth rate of 11.1% for 2020 and carries a Zacks Rank #2. The company’s shares have surged 143.1% year over year.
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