Huntsman acquired Demilec
On March 13, 2018, Huntsman (HUN) announced that it acquired Demilec. Demilec manufactures and distributes a spray polyurethane foam insulation system catered to residential and commercial applications. Huntsman will pay $350 million in cash for the acquisition, which represents 11.5x its 2018 EBITDA (earnings before interest, tax, depreciation, and amortization). Demilec’s annual revenues are estimated at $170 million annually. Demilec also has two manufacturing facilities in Arlington and Boisbriand.
The deal is expected to be completed by the end of 2Q18. Huntsman will finance the deal from its cash-in-hand. Peter Huntsman, the chairman, president, and CEO, said, “This bolt-on acquisition is a great fit to our core strategy to move downstream. The integration of Demilec into our Polyurethanes business offers significant synergies and delivers substantially higher and very stable margins by pulling through large amounts of upstream polymeric MDI into specialized spray foam systems. This integrated business will have greater than 25% EBITDA margins and double-digit growth.”
Stock price update
Huntsman’s stock price declined 3.9% and closed at $31.14 for the week ending March 16, 2018. As a result, the stock is trading 3.8% below the 100-day moving average price of $32.35, which indicates prevailing weakness in the stock. On a year-to-date basis, the stock has declined 6.5%. In comparison, Eastman Chemical (EMN) and Westlake Chemical (WLK) have gained 16.4% and 8.8%, respectively. Celanese (CE) has declined 0.3%. Huntsman also underperformed the First Trust Materials AlphaDEX Fund (FXZ), which declined 1.9% during the same period. FXZ has invested 3.2% of its portfolio in Huntsman as of March 16, 2018.