Huntsman Declares Venator IPO Completion, Plans To Cut Debt

Huntsman Corporation (NYSE:HUN) has announced the completion of initial public offering (IPO) by its subsidiary, Venator Materials PLC, a global chemical company and manufacturer of titanium dioxide (TiO2) pigments and performance additives.

The IPO of 26,105,000 ordinary shares includes 3,405,000 ordinary shares issued upon the exercise by the underwriters of their option, in full, to purchase additional ordinary shares. Venator’s ordinary shares has started trading on the NYSE under the ticker symbol “VNTR”.

Huntsman plans to use the net IPO proceeds of about $475 million and roughly $725 million of net proceeds from the Venator debt distribution to repay its existing debt. Significant debt reduction worth $1.2 billion will make Huntsman's trailing 12-month pro-forma net-debt-to-EBITDA roughly 2.5 times.

Further, the debt reduction will lower Huntsman’s annual cash interest expense by about $45 million. The company has repaid over $2 billion of debt, including the Venator proceeds, since Jan 2016.

According to the company, this IPO is a significant milestone as it will create considerable value for shareholders through debt reduction. Huntsman’s increased financial strength and the completion of this IPO makes it well-poised toward completing the merger of equals with Clariant.

Shares of Huntsman have declined 1.2% in the last three months versus the 4% gain of its industry.

Huntsman’s adjusted earnings of 85 cents per share for second-quarter 2017 topped the Zacks Consensus Estimate of 67 cents. Revenues of $2,616 million came in line with the Zacks Consensus Estimate. The second quarter benefited from enhanced free cash flow generation, solid underlying fundamentals and the company’s downstream strategy. The company expects to attain earnings growth in all business segments in 2017.

Huntsman witnessed decreased revenues in its Pigments and Additives unit in the second quarter due to lower sales partly offset by higher average selling prices. Revenues of Performance Products also declined owing to lower sales volume resulting from the sale of the European Surfactants business to Innospec Inc. (NASDAQ:IOSP) .

Huntsman currently carries a Zacks Rank #4 (Sell).

Stocks to Consider

Some better-ranked stocks in the basic materials space are POSCO (NYSE:PKX) and Kronos Worldwide Inc (NYSE:KRO) . Both stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

POSCO has expected long-term earnings growth rate of 5%.

Kronos has expected long-term earnings growth rate of 5%.

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