Huntsman Proceeds With Clariant Deal, To Address FTC Concerns

Huntsman Corporation (NYSE:HUN) recently announced that it is on track toward satisfying the regulatory approval conditions required to close its “merger of equals” deal with Clariant AG.

The U.S. Federal Trade Commission (FTC) has directed Huntsman to provide information relating to only two products, a polyetheramine product (used in certain construction and paint/ additive and ink applications) and sodium isethionate (used in personal care products such as shampoos and soap).

According to Huntsman, these products accounted for less $20 million of its total revenues in the United States in 2016. The company is confident of satisfying all FTC concerns related to the merger and is also optimistic about closing the deal by the end of the year.

Huntsman and Clariant have agreed to combine in an all-stock deal that will create a leading chemical specialty company with revenues of roughly $13.2 billion and enterprise value of about $20 billion. This merger of equals will create a formidable industry player that will help the companies grow their foothold in high-growth markets, cut operating costs and expand margins.

The merged entity will be named HuntsmanClariant, where Huntsman’s shareholders will hold 48% interest in the merged entity and the remaining 52% will be owned by Clariant.

The merged entity will leverage shared knowledge in sustainability and joint innovation platform, enabling the development of new products to drive shareholders’ value and deliver superior returns. The merged entity will speed up value creation for shareholders through robust combination of products, technology and talent. This will translate into annual cost synergies of approximately $400 million and generate over $3.5 billion in value creation.

Shares of Huntsman have lost 4.5% of its value in the last three months versus the 1.5% growth 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 was 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.

However, the company 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 #3 (Hold).

Stocks to Consider

Some better-ranked stocks in the basic materials space are The Chemours Company (NYSE:CC) 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.

Chemours has expected long-term earnings growth rate of 15.5%.

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

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