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Indorama Ventures concludes USD2 Billion acquisition of Huntsman integrated EO & PO assets

January 13/2020

MOSCOW (MRC) -- Indorama Ventures Public Company Limited (IVL), a global chemical producer, has completed its acquisition of Huntsmanís world-class integrated oxides and derivative businesses, including a large flagship site on the US Gulf Coast (USGC) at Port Neches, as well as Chocolate Bayou and Dayton in Texas, Ankleshwar in India, and Botany in Australia, as per IVL's press release.

The acquisition is a profitable and growing end applications business along with unique products and geographical profile among the crowded olefins space. It has a well-integrated assets base with an extensive infrastructure and future expansion possibilities. The area is adjacent to many USGC feedstock suppliers. The cash value of USD2.0 billion makes it the largest acquisition by Indorama Ventures ever and now our capital employed is nicely spread over plastic, chemicals and fibers. The transaction value translates to an EV/EBITDA of ~5.7x and is expected to add substantial synergies to Indoramaís existing 450kta Ethane/Propane Cracker and our 550kta EO/EG. IVL will now be integrated from Ethane to PET as well as the high-margin EO and PO derivative businesses.

This acquisition reinforces IVLís Integrated Oxides and Derivatives (IOD) segmentís continued development as envisaged in our strategy announcement in February 2019 and includes much sought after portfolios of value-added EODs and Propylene Oxide (PO) Derivatives, each coming with its own strong market position. The acquisition comes with its own strong R&D and technical capabilities apart from portfolio of about 900 patents and other intellectual properties. Entry into Australia will further diversify Indoramaís geographic presence. The Huntsman and Indorama Ventures assets are managed by extremely talented people who together will forge a successful global footprint and leverage the financial and commercial skills of Indorama to create shareholder value.

The acquisition will provide unprecedented entry into global niche markets and industries serving consumerís daily needs with a sustained growth rate of ~5%. These products are used in home & personal care consumer goods, such as detergents, cleansers, shampoo, furniture applications, automotive parts fuels and lubricants. IVL has significant understanding of some of these end markets through its Fibers and PET businesses. New and exciting businesses include agrochemicals such as herbicides and unsaturated polyester resins for coatings, particularly in marine use.

IVL is committed to extracting further synergies and opportunities, such as supply chain and procurement consolidation as well as lowering corporate overheads and SG&A. These synergy benefits will further boost EBITDA contribution by USD 40M by 2021. Additional capex planned for the high value-added surfactants business will add incremental EBITDA of USD60M by 2022.

The transaction is funded by IVLís internal cash flows and debt financing only and does not necessitate any equity dilution.

Mr. Aloke Lohia, Group CEO of Indorama Ventures, said, "I am excited to conclude this momentous deal with Peter Huntsman, a remarkable businessman, which will keep us both ahead of the curve and enhances our leadership in our chosen industries. I see this as IVLís most strategic and ambitious deal as we set our goals and aspirations at the turn of this decade and as we groom ourselves into a global, diversified chemicals company with multiple integrated, and related earning streams.

ďI would like to heartily welcome our new colleagues to the IVL family and I am confident that together we will drive this important business to generate significant value for all our stakeholders, reduce earnings volatility, and underpin IVLís earnings growth opportunities for years to come."

As MRC wrote before, in May 2019, IVL announced that its indirect subsidiary Indorama Ventures Olefins in Westlake, LA, a manufacturer of Ethylene from Ethane with an annual capacity of 440,000 MT, achieved mechanical completion and was undergoing trial runs. IVOL then stabilized the production of on-spec ethylene and its byproducts at 5 of its 7 furnaces and ramped up gradually during the course of 2Q19. This project is the most ambitious project of its kind in IVL history and creates an exciting new platform of growth as well as affording stability and supply chain advantages to the EO/EG business by its pipeline integration. At normalized production, IVL will secure ~75% ethylene for internal consumption for EO/EG production and merchant the remaining output.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,904,410 tonnes in the first eleven months of 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments increased from both domestic producers and foreign suppliers. The PP consumption in the Russian market was 1,161,830 tonnes in January-November 2019, up by 7% year on year. Deliveries of all grades of propylene polymers increased, with the homopolymer PP segment accounting for the largest increase.

Indorama Ventures Public Company Limited, listed in Thailand, is one of the world's leading petrochemicals producers, a global manufacturing footprint with 59 sites in 20 countries across Africa, Asia, Europe and North America. The company's portfolio is comprises necessities and high value-added (HVA) categories of polymers, fibers, and packaging. Indorama Ventures has approx. 15,000 employees worldwide and consolidated revenue of USD 8.4 billion in 2017. The company is listed in the Dow Jones Sustainability Index (DJSI).

Huntsman Corporation is a publicly traded global manufacturer and marketer of differentiated and specialty chemicals with 2017 revenues of more than USD8 billion. Its chemical products number in the thousands and are sold worldwide to manufacturers serving a broad and diverse range of consumer and industrial end markets. The company operate more than 75 manufacturing, R&D and operations facilities in approximately 30 countries and employ approximately 10,000 associates within its four distinct business divisions.
Author:Margaret Volkova
Tags:PP, PE, homopolymer PP, propylene, ethylene, Huntsman, Indorama Ventures PLC, Russia, USA.
Category:General News
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