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Huntsman to Delay Purchase of ICI Stake Says Reuters
SALT LAKE CITY, UTAH -- Billionaire Mormon businessman Jon M.
Huntsman is expected to announce this week a new deal, says Reuters,
with Britain's Imperial Chemical Industries Plc (ICI) that will delay
the planned buyout of ICI's 30% stake in Huntsman International. The
delay, expected to be for at least a year, highlights the weakness in
the commodity chemicals industry and in Huntsman's financial
position, trouble that led Huntsman Corporation, which owns the
billionaire's North American operations, to drop two interest
payments and watch its bond ratings drop into S&P's cellar.
The Belgium-based joint venture, Huntsman International, was formed
when Huntsman agreed to acquire ICI's commodity chemicals businesses
in April 1998 for $2.8 billion, allowing ICI to get out of commodity
chemicals and focust solely on the higher profit specialty chemicals
business. But financing for the deal left the companies in a joint
venture owned 70% by Huntsman and 30% by ICI, which also held an
option to sell its stake to Huntsman. ICI exercised that option in
October.
However, the recent economic downturn has caught Huntsman in a
financially difficult situation, and one that left it unable to pay
for ICI's stake. Commodity chemicals are sensitive to the business
cycle, so the downturn means sales of Huntsman's products have
slumped. In August Forbes Magazine reported that Huntsman was "in a
very tight spot," because of the slump and the amount of long-term
debt the company was carrying because of acquisitions.
The situation led credit rating firm Standard and Poors to downgrade
Huntsman's debt repeatedly. Huntsman also had to hire restructuring
shop Dresdner Kleinwort Wasserstein to negotiate with creditors, and
then early this month Huntsman announced it would miss interest
payments on corporate bonds due December 3rd and January 1st, leading
S&P to drop Huntsman's rating to just one step above S&P's lowest.
Meanwhile, Huntsman had tried to get financing to purchase the ICI
stake earlier this year through venture capital firms Blackstone
Group and Bain Capital (run by LDS Church member Mitt Romney before
he became head of the Salt Lake Organizing Committee). But Huntsman's
financial troubles led the two firms to pull out of the deal. The
company eventually was able to get $150 million in financing in late
November, but the lender's wouldn't allow the funds to be used for
interest payments.
Reuters claims that the new deal with ICI will include significant
incentives to keep it in the partnership for at least another year --
until the economy improves. "Huntsman can't be doing acquisitions
with its current capital structure," Huntsman executive vice
president Sam Scruggs told Reuters in an interview. This means, he
said, Huntsman and ICI "will be partners longer." The terms of the
deal aren't yet known, but Scruggs says "we have cut a deal that ICI
thinks is better than the alternatives."
But Huntsman spokesman Don Olsen says that the purchase will
eventually happen, "We're definitely going to acquire Imperial
Chemical's interest," he said. "It is just a matter of when that will
happen and what the price will be."
And while Huntsman is in a bind -- Fitch, Inc. analyst Omar Jama says
Huntsman can't even raise cash by selling assets because "There is no
market for assets in the chemical business" right now -- Huntsman's
creditors are in a still tighter spot, "Even if they could force the
company into bankruptcy, what is that going to achieve?" Jama points
out. "All they can do is exercise some forbearance and wait to get
their money back."
Source:
MERGER TALK - Huntsman scraps plans to buy out ICI venture
IWon (Reuters) 17Dec01 B4
By Dane Hamilton
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