Huntsman (HUN +3%) agrees to sell three European manufacturing plants for $225M to Innospec (IOSP +6.1%) to help pay off debt.
HUN says it is selling its surfactants plants in France, Italy and Spain, but that it remains dedicated to its surfactants business in the U.S. and Australia; surfactants are chemicals used to make detergents and other products, such as disperants, for cleaning up oil spills.
HUN says it plans to enter into supply and long-term tolling arrangements with IOSP to continue marketing some of the products.
Innospec (IOSP +1.3%) is higher after Barron's profiles the specialty chemical company as oversold after investors have dumped shares thanks to guilt by association with the energy industry.
IOSP's oilfield services business accounts for just 25% of sales, so while energy’s downturn has hurt results, the company is not dependent on its recovery; fuel additives make up 55% of revenue, and the segment continues to perform well.
Even though IOSP had a down Q4, it still finished 2015 with record cash on the books, 3x its cash in Q4 2014; "to have a tough quarter like that and still generate gobs of cash shows the resilience of the business model," says David Bechtel of Barrow Street Advisors.
Chemtura (CHMT +2.8%) is upgraded to Overweight from Sector Weight at Keybanc Capital, which expects the company to benefit from higher bromine prices, improved manufacturing costs and a positive price/cost spread, and that margins in the petroleum additives business may hold up better than anticipated.
The firm thinks low growth opportunities in the end markets, robust balance sheets and low financing costs are triggering M&A activity in the specialty chemicals sector, and that CHMT and Innospec (IOSP +5.2%) could be buyers or sellers, and the two companies “should consider combining.”
M&A is a potential catalyst for both names, and "there are merits to the two linking up, strategically amassing greater collective scale and reorienting their combined portfolio toward more attractive end markets,” Keybanc says.
Innospec (NASDAQ:IOSP) agrees to acquire oil and gas services company Independence Oilfield Chemicals from CSL Capital Management; after an initial $100M payment, remaining payments are performance related and payable over the next two years.
Houston-based IOC has current sales of ~$150M/year and has assets based in the Eagleford, Bakken, Barnett, Niobrara and Marcellus basins.