Huntsman Corporation (NYSE:HUN) announced Tuesday that it will acquire the titanium dioxide and performance additives businesses of Rockwood Holdings, Inc. (NYSE:ROC) for $1.1 billion in cash. The deal will make Huntsman Corporation (NYSE:HUN) the world’s second largest titanium dioxide producer, reports the Associated Press. Titanium dioxide is an important ingredient of white paint, coatings and toothpaste. The Salt Lake City-based company will also take $225 million in unpaid pension obligations.
Huntsman to spin off pigment business
Huntsman Corporation (NYSE:HUN) CEO Peter Huntsman said that the pigment business of Rockwood Holdings, Inc. (NYSE:ROC) will be merged into his company’s pigment operations. And within two years of acquisition, the combined pigment business will go public in an initial public offering. The acquisition is expected to close in the first half of 2014.
Rockwood Holdings, Inc. (NYSE:ROC) said in a statement that exiting its titanium dioxide and other pigment businesses is a part of its strategy. The deal will help the company focus on its core lithium business. Rockwood Holdings, Inc. (NYSE:ROC) has been trying to get rid of its non-core assets. Earlier this year, the company sold its CeramTec GmbH business for $1.99 billion to Cinven Partners LLP. The company has already sold its rheology business to German firm Altana AG for $635 million.
Huntsman initiates a shakeup in titanium industry
After the acquisition, Huntsman Corporation (NYSE:HUN) will control 15 percent of the global titanium dioxide market. Chemical giant E I Du Pont De Nemours And Co (NYSE:DD) has a 20 percent market share, while Saudi Arabia’s Crystal currently has a 14 percent market share. The titanium dioxide industry is undergoing a shake-up. E I Du Pont De Nemours And Co (NYSE:DD) said that it is evaluating various options for its titanium business. Tronox Ltd (NYSE:TROX) has expressed interest in purchasing titanium dioxide businesses, report Jack Kaskey & Simon Casey of Bloomberg.
Last year, Rockwood Holdings, Inc. (NYSE:ROC)’s titanium business generated $889 million in sales, much lower than Huntsman Corporation (NYSE:HUN)’s $1.44 billion. Prices of titanium dioxide have started falling since last year due to oversupply, reducing profitability of the companies. Huntsman Corporation (NYSE:HUN) said that the acquisition is expected to add 60 cents to its EPS.
Huntsman Corporation (NYSE:HUN) shares jumped 4.48 percent to $20 at 9:54 AM EDT.