Huntsman to Divest European Assets to Wilmar - Analyst Blog

Chemical company Huntsman Corporation HUN has agreed to divest its European commodity surfactants business to Wilmar International Limited's fully-owned subsidiary – Wilmar Europe Holdings B.V. – for an undisclosed price. Completion of the transaction is subject to customary closing conditions, including regulatory procedures in France.

Per the agreement, Huntsman will divest its ethoxylation facility in Lavera, France to Wilmar. Additionally, Huntsman will supply sulphated surfactant products from its facilities in St. Mihiel, France and Castiglione delle Stiviere, Italy to Wilmar as part of a multi-year arrangement inked by the companies.

Separately, Huntsman also plans to cease production at its commodity surfactants facility in Patrica, Italy by Oct 2014. Huntsman's decision to discontinue operations at its Patrica facility along with disposal of assets to Wilmar is part of its plans set back in Oct 2013 to improve its annual EBITDA by $20 million by exiting a number of commodity surfactant product lines in Europe and focusing more on uplifting and growing the remaining differentiated surfactants businesses. Moving ahead, this will make the surfactants business a smaller but more profitable business unit in Europe.

Shares of Huntsman dropped as much as 3% in the trading session after the announcement of the news.

Huntsman's divestment and offtake agreement with Wilmar is mutually beneficial for both parties as it will enhance their strong relationship to serve both in their respective growth strategies.

The agreement is a strategic fit for Huntsman as it will add to its restructuring and portfolio repositioning program for the Performance Products division in Europe. This will also help in preserving jobs which otherwise would have been lost.

Wilmar will also benefit from this agreement by broadening its existing foothold in Europe and expanding its integrated chain to better serve customers in a broader geographic area with responsible and quality products. The two parties, working closely together, will ensure a smooth and seamless transition for both customers and shareholders.

Huntsman, which carries a Zacks Rank #2 (Buy), will release its first-quarter 2014 results on Apr 29.

Other companies in the chemical industry worth considering include Methanex Corp. MEOH, Olin Corp. OLN and Celanese Corp. CE. While Methanex holds a Zacks Rank #1 (Strong Buy), both Celanese and Olin carry a Zacks Rank #2 (Buy).