Morgan Stanley Considers Possible Spinoff of DuPont's TiO2 Unit Following Hunstman, Rockwood Deal

Following the recent Huntsman

and Rockwood

deal, Morgan Stanley's Vincent Andrews earlier issued a note suggesting the likelihood for DuPont

to spin off its titanium dioxide business has increased. On Tuesday Rockwood agreed to sell its titanium dioxide business to Hunstman Corp. for $1.1 billion. Titanium dioxide (TiO2) is a pigment commonly used to whiten toothpaste and paint, among other things. The deal makes Huntsman the second-largest producer of the pigment in the world. Huntsman has said it will initiate an IPO for its new TiO2 assets within two years. By creating this company, Huntsman can draw investor attention to it's more profitable products, such as polyurethanes. Rockwood, on the other hand, can now concentrate on its more valuable lithium business. DuPont, the world's largest manufacturer of TiO2, has a hold of 20 percent of the TiO2 market, against the 16 percent Huntsman will control following its deal with Rockwood. Huntsman's intended titanium oxide IPO has raised speculation that competitors might follow suit. Morgan Stanley's Andrews believes DuPont

will initiate an IPO for its TiO2 unit in the near future as well. Andrews noted a recent $343 million investment in DuPont by Nelson Peltz's Trian Fund. Andrews currently rates DuPont at Equalweight.