Huntsman (HUN) To Acquire Icynene-Lapolla For $350 Million

Huntsman Corporation (NYSE:HUN) announced deal to buy Icynene-Lapolla from an affiliate of FFL Partners, LLC. Notably, 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.

The acquisition is expected to expand Huntsman’s downstream footprint in SPF insulation.

Per the terms of the deal, the company is expected to pay $350 million in the all-cash transaction financed from available liquidity, subject to customary closing adjustments.

Based on 2019 adjusted EBITDA forecast, the purchase price suggests an adjusted EBITDA multiple of 10 times or adjusted EBITDA pro forma of 7 times for synergies. The transaction is slated to close in the first half of 2020.

Per Huntsman’s management, the combination of Icynene-Lapolla (with its SPF product range and reflective roof coatings), with Demilec (acquired by Huntsman in 2018) is expected to significantly strengthen its energy-saving insulation business and provide customers with an unparalleled choice offering. The combination will also provide Huntsman with the world’s largest range of spray foam technology, integration of raw materials and associates.

Huntsman's shares have gained 21.8% in the past year against the industry’s 18.8% 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 General Moly, Inc (NYSE:GMO) , Franco-Nevada Corporation (TSX:FNV) and Agnico Eagle Mines Limited (NYSE:AEM) , each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

General Moly has an expected earnings growth rate of 12.5% for the current fiscal year. The company’s shares have gained 34.8% in the past year.

Franco-Nevada has a projected earnings growth rate of 45.3% for 2019. The company’s shares have rallied 37% in a year.

Agnico Eagle has an estimated earnings growth rate of 167.9% for the current year. Its shares have moved up 51.8% in the past year.

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