NOVA Corp., Calgary, has signed a letter of intent to acquire the North American and European styrenics holdings of Huntsman Corp., Salt Lake City. The transaction is valued at $920 million.
NOVA will pay Huntsman $685 million in cash and $235 million in stock for 3.28 billion lb/year of styrenics capacity plus its styrene marketing business. This total includes the assumption of $60 million in Huntsman debt.
NOVA has arranged for financing of the remaining $625 million cash balance of the purchase price.
Huntsman said it will use proceeds from the sale to pay down debt and for humanitarian and charitable causes. Huntsman is expected to be NOVA's largest single shareholder following the exchange of preferred shares, which will begin July 1, 2000.
A member of the Huntsman family will have a seat on the NOVA board.
Under terms of the agreement, NOVA will be responsible for manufacturing and marketing of styrene monomer (SM), polystyrene (PS), and expandable PS. NOVA's styrenics assets produced about $600 million in sales last year, while the acquired assets are responsible for about $900 million in annual sales, said Huntsman.
Excluded from the transaction are Huntsman's Odessa, Tex., styrene facility and its Australian styrenics business. Included are Huntsman's plants at: Bayport, Tex. (1.25 billion lb/year SM); Belpre, Ohio (480 million lb/year solid PS) ; Chesapeake, Va. (400 million lb/year solid PS); Joliet and Peru, Ill. (combined 350 million lb/year solid PS, 170 million lb/year foam and specialty PS); Mansonville, Que. (30 million lb/year foam and specialty PS); Carrington, U.K. (400 million lb/year solid PS); and Ribecourt, France (200 million lb/year foam and specialty PS).
According to NOVA, "Huntsman's polystyrene operations also include value-added compounding facilities and leading-edge technology and research capabilities."
NOVA has SM capacity of 600 million lb/year at Sarnia, Ont., and 1.4 billion lb/year at Channelview, Tex. (including tolling arrangements with ARCO Chemical Co.). It also has 915 million lb/year of solid PS capacity in the U.S. and Canada and 365 million lb/year of foam and specialty PS capacity in the U.S.
Following completion of the transaction, NOVA's capacities will be 2.65 billion lb/year of SM, 2.545 billion lb/year of solid PS, and 765 million lb/year of foam and specialty PS.
Cost savings
NOVA Pres. and CEO Jeff Lipton said, "We're confident we can create short-term value through rapid cost reductions, leading to major improvements in our business. In the longer term, we will create a cost-efficient organization that will deliver the highest value to its customers through technology and service enhancements."NOVA says it has identified cost-cutting measures that will have an immediate effect and are expected save $75 million/year, before taxes, by the third year of operation.
In North America, NOVA will streamline product offerings and rationalize operations, facilities, sales, and administration.
"In Europe, Huntsman is already a low-cost industry leader," said NOVA. But the merger will reduce costs there by increasing plant utilization, rationalizing sales and administration, and reducing logistical costs on current U.S. exports to Europe.
The firm has identified other improvements that could save as much as $30 million/year, pretax, also by the third year, it says. These include leveraging the technological capabilities of the combined businesses by focusing on compounding and low-impurity products and improving its product delivery system through lower-cost local production.
NOVA also announced that it will offer for sale its Dylark specialty automotive engineering resins business.
"We're selling this specialty business because we believe it is inconsistent with our commodity focus," said Lipton, "and will be a better fit with another company."
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