Huntsman (HUN) Acquires Demilec in All-Cash Deal Worth $350M
Huntsman Corporation HUN is acquiring Demilec from an affiliate of Sun Capital Partners, Inc., in an all-cash deal worth $350 million that will be funded from its available liquidity. The buyout is anticipated to conclude by the end of second-quarter 2018.
Demilec, a leading manufacturer and distributor of spray polyurethane foam (SPF) insulation systems in North America, has two manufacturing facilities located Texas and Quebec. It has annual revenues of roughly $170 million. It produces a full suite of MDI based SPF formulations and markets directly to applicators as well as through distributors.
Notably, Demilec specializes in both open cell and closed cell formulations focusing on products with recyclable and renewable contents, which are bio-preferred, eco-friendly and reduce energy consumption through highly efficient insulation properties.
Demilec has pioneered the MDI SPF insulation and coating technologies for more than three decades. Further, the company and the entire SPF industry has delivered a strong double-digit growth, which Huntsman expects to sustain as its technology provides exceptional insulation performance globally.
According to Huntsman, integration of Demilec into its Polyurethanes business delivers considerably higher and stable margins along with offering significant synergies by pulling large quantities of upstream polymeric MDI into specialized spray foam systems. The integrated business is likely to have more than 25% EBITDA margins and double-digit growth.
Notably, Huntsman generated free cash flow of $190 million during fourth-quarter 2017, up around 42.9% from $133 million a year ago. During 2017, the company repaid debt worth roughly $2.1 billion. It also had total cash and unused borrowing capacity worth $1,247 million at the end of 2017.
Shares of Huntsman have moved up 12.4% in the past six months, outperforming the industry’s 2.7% growth.
Zacks Rank & Other Stocks to Consider
Huntsman currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the basic materials space are LyondellBasell Industries N.V. LYB, CF Industries Holdings, Inc. CF and Daqo New Energy Corp. DQ, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
LyondellBasell has an expected long-term earnings growth rate of 9%. Its shares have moved up 11.4% over the last six months.
CF Industries has an expected long-term earnings growth rate of 8%. Its shares have gained 4.8% over the last six months.
Daqo New Energy has an expected long-term earnings growth rate of 7%. Its shares have rallied 58.9% over the past six months.
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