June 14, 2012 / 6:29 PM / 6 years ago

Exclusive: Bank of America shops Huntsman to PE firms: sources

NEW YORK (Reuters) - Bank of America Merrill Lynch (BAC.N) has reached out to several top U.S. private equity firms to gauge their interest in a potential deal for Huntsman Corp (HUN.N), sources said, in the latest sign the U.S. chemicals company may be considering a sale.

KKR & Co LP (KKR.N), Bain Capital, Advent International and Warburg Pincus LLC WP.UL are among private equity firms that the bankers have reached out to recently, the sources familiar with the situation said.

Huntsman had a market value of about $2.8 billion at market close on Wednesday and nearly $4 billion of debt, according to Reuters data. The company’s shares were up 10 percent on Thursday afternoon.

It could not be learned whether Bank of America, which has a close relationship with Huntsman, was making the calls on behalf of Huntsman or on its own.

Merrill Lynch, now part of Bank of America, advised Huntsman when it tried to sell itself in 2007.

Huntsman, Bank of America and the private equity firms declined to comment.

The calls come after Huntsman’s founder, Jon Huntsman, said in March that the company was open to all options to create shareholder value.

Huntsman was founded in 1970 and is now run by Jon Huntsman’s son, Peter. The elder Huntsman and his family are still the largest shareholders of the company, with nearly 20 percent of its shares. One of Huntsman’s other sons is Jon Huntsman, the former U.S. ambassador to China who tried but failed to become the Republican candidate in this year’s presidential election.

Huntsman, which makes chemicals used in paint, clothing, housing, construction and cars, has long been pegged as a candidate for a takeover. It has tried to sell itself before.

Moreover, several large private equity firms have bid on DuPont’s DD.N car paint unit, suggesting there is interest from buyout funds in the chemicals sector.

Huntsman’s assets may not have the same draw as the DuPont business. Last summer, Huntsman’s stock was trading around $20 per share - the company’s highest value since the stock plunged to around $3 per share in early 2009, when demand fell and Wall Street took a negative view of the company’s large debt load.

But as crude oil and other supply costs rose, investors worried that Huntsman would not be able to pass on costs to customers indefinitely. Those fears were confirmed last August, when Huntsman reported a lower-than-expected quarterly profit, citing rising supply costs.

The miss caused Huntsman’s stock to lose nearly a third of its value in one day. The stock has yet to recover and is now trading at around $12 a share.

Huntsman may prove to be too big for a private equity firm to swallow whole on its own. Bankers who have looked at the company suggest it would take an equity check of up to $2 billion and would require a consortium of as many as three private equity firms, which would complicate any deal.

At least some of the buyout firms contacted by Bank of America - including KKR and Advent - have already decided to pass on the opportunity, some of the sources said.

    TAKEOVER INTEREST

    The company has been a rumored takeover target since the failed 2007 deal. Its founder’s recent focus on his philanthropy - “my job is to cure cancer,” he told investors in March - has further fueled speculation he would be interested in selling out.

    Huntsman, a four-time cancer survivor, created the Huntsman Cancer Institute and has put $1.2 billion into charity.

    Indeed, he said in March that the company was “sought-after by many other people” and was open to all options, noting that he was disappointed with its current stock market valuation.

    “As the largest shareholder and as the chairman of our board - executive chairman - we’re going to do something in 2012 that improves shareholder value substantially,” Huntsman said, speaking at the company’s investor day.

    Apollo Global Management LLC’s (APO.N) Hexion Specialty Chemicals unit had agreed to buy Huntsman for $6.5 billion in July 2007. The private equity firm offered Huntsman $28 a share, topping a previous deal with Dutch company Basell AF.

    The deal faltered amid the credit crisis and legal battles as Apollo tried to walk away, citing insolvency concerns about the combined company. Huntsman received a $750 million payout from the private equity firm for walking away from the deal.

    The company’s shares were up 10 percent at $13.09 on Thursday afternoon.

    Additional reporting by Soyoung Kim and Ernest Scheyder; editing by Maureen Bavdek, Paritosh Bansal, Gary Hill and Andre Grenon

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