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Venator IPO Closes: Will Huntsman Benefit?

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Huntsman and Venator IPO

On August 8, 2017, Huntsman (HUN) announced that its subsidiary, Venator Materials, had closed its initial IPO of 26,105,000 ordinary shares, which include underwriters’ full exercise. Venator was listed on the New York Stock Exchange on August 3, 2017. 24.6% of the shares will be held by the public, while the remaining 75.4% will be held by Huntsman.

The net proceeds from the IPO of $425 million along with the net proceeds from debt distribution of $725 million will be used by Huntsman to reduce its debt. At the end of 2Q17, HUN had a debt of $4.1 billion and cash in hand of $520 million. Using the above-mentioned proceedings, Huntsman plans to cut down its debt by $1.2 billion. This will also help HUN to reduce its interest expense by $45 million per year.

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President and CEO of Huntsman, Peter Huntsman, said, “Huntsman shareholders will benefit from the $1.2 billion reductions of debt and we will look to pay down additional debt as we monetize our remaining position in Venator over time and in an orderly fashion. The completion of this IPO and our increased financial strength positions us well as we work towards completing our merger of equals with Clariant.”

Huntsman’s stock performance

Huntsman stock fell 2.4% for the week ended August 11, 2017. The decline in the stock has resulted in HUN trading just below the 100-day moving average price of $25.16, indicating a trend reversal in the stock. On a year-to-date basis, the stock has given a return of -5.6%. Analysts suggest the stock price will rise to $29.88 over the next 12 months, implying a potential return of 18.8%. HUN’s RSI of 37 indicates that the stock is neither overbought nor oversold.

Investors looking for exposure in Huntsman can invest in the First Trust Materials AlphaDEX Fund (FXZ), which invests 2.6% of its holdings in HUN. The fund also provides exposure to Westlake Chemical (WLK), LyondellBasell (LYB), and Eastman Chemical (EMN), which have weights of 3.5%, 2.8%, and 2.7%, respectively, as of August 11, 2017.

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