Rockwood Holdings, Inc.
) gained roughly 2% following its announcement of the divestiture
of its Titanium Dioxide (TiO2) Pigments and four other
non-strategic businesses to
A Prudent Move
The move appears prudent as lower earnings from the TiO2 Pigments
division were one of the reasons for lower profit in the second
quarter of 2013. Adjusted earnings before interest, taxes,
depreciation, and amortization (EBITDA) for the division slumped
117.3% year on year, hurt by weak selling prices.
From the historical point of view, the TiO2 Pigments division's
adjusted EBITDA has shown declining trends over the last four
quarters and net sales from the business declined in two of last
The TiO2 Pigments business was Rockwood's biggest business unit
in 2012 with sales of roughly $900 million, representing about
25% of its total sales of nearly $3,700 million.
The divestiture is in line with Rockwood's goal to become a more
focused specialty chemical company. It is now uniquely positioned
to implement its long-term business strategy that will enhance
Huntsman is a major producer of TIO2, PU and other specialty
materials and the acquisition it will make it the world's
second-largest TIO2 producer.
Rockwood is selling its TiO2 Pigments, Color Pigments &
Services, Timber Treatment Chemicals, Rubber/Thermoplastics
Compounding, and Water Chemistry businesses to Huntsman. Combined
net sales generated from these businesses were $1,450.8 million
for twelve months ended Dec 31, 2012.
Huntsman will pay $1.1 billion in cash, and will also
assume $225 million in pension obligations, subject to other
customary adjustments, for the acquisition, leading to an
enterprise value of $1.325 billion. The deal is subject to
necessary regulatory approvals and is expected to complete by the
first half of 2014.
For the transaction,
) acted as Rockwood's financial advisor and Hughes Hubbard &
Reed LLP and Willkie Farr & Gallagher LLP as legal advisors.
BofA Merrill Lynch, the investment banking and wealth management
Bank of America Corporation
), and Vinson & Elkins served as financial advisor and legal
advisor, respectively, to Huntsman on this transaction.
With the divestiture, Rockwood has successfully accomplished
all four of its key objectives set for 2013. The company has
fulfilled its objective to repurchase $400 million of common
shares in 2013 by acquiring 6.23 million shares at an average
price of $64.17 per share, closing the program on Sep 5.
BANK OF AMER CP (BAC): Free Stock Analysis
HUNTSMAN CORP (HUN): Free Stock Analysis
LAZARD LTD (LAZ): Free Stock Analysis Report
ROCKWOOD HLDGS (ROC): Free Stock Analysis
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To fulfill its second objective of meeting a target dividend
yield of 2.8% to 3.2%, Rockwood increased its quarterly dividend
by around 30% to 45 cents per share from 35 cents per share in
2012. Rockwood also repaid a debt of more than $1.43 billion in
principal loans related to secured term debt to meet its third
objective to repay debt of up to $600 million.
As a part of Rockwood's fourth objective to launch strategic
process for its non-core businesses, it sold seven of its
non-strategic businesses for an enterprise value aggregating
nearly $3.9 billion. The sale of TiO2 Pigments and Other
Non-Strategic Businesses was the last one to conclude this
initiative. The other non-core businesses sold include Advanced
Ceramics for €1.49 billion (roughly $2 billion) and Clay Based
Additives for $635 million.
Rockwood currently holds a Zacks Rank #5 (Strong Sell).