Huntsman Corp. officials late last week were studying whether to pursue their bid for Rexene Corp., after Rexene rejected an unsolicited offer of $267 million for the Dallas-based company. Huntsman also had offered to assume about $175 million in Rexene debt, making its total offer worth about $442 million.
Huntsman's bid for the maker of resin, petrochemicals and plastic films follows its strategy of expanding through acquisition. But one chemical industry analyst questioned Huntsman's timing, saying prices could be coming down for chemical companies as the industry enters a downturn.
Members of Rexene's board of directors met July 22, then voted unanimously to reject Huntsman's $14-a-share bid. Rexene's stock was trading at about $9 per share before news of the offer became public.
Andrew Smith, Rexene chairman and chief executive officer, called the offer ``harmful to the best interests of Rexene's shareholders and customers.'' He said the firm's financial performance has not begun to reflect results of a capital expenditure program, including the introduction of Rexflex FPO propylene polymers later this year and the expected startup in 1998 of the first ``compact process'' plant to make linear low density polyethylene.
Jon M. Huntsman, chairman and CEO of privately held Huntsman Chemical in Salt Lake City, made the offer in a July 17 letter to Smith. Both companies announced the unsolicited bid two days later.
Huntsman said July 25 that it was weighing all options and had not ruled anything out.
Spokesman Don Olsen said Huntsman believes the offer is fair and at a significant premium over the previous share price.``The Rexene board is clearly not doing things in the best interest of their shareholders,'' he said.
Olsen said Rexene would be a good fit with Huntsman, since they make many of the same products. Also, buying Rexene would help Huntsman's expansion into polypropylene.
Rexene also owns CT Film, a major supplier of specialty films to large markets such as diapers, feminine hygiene products and medical products. CT Film placed 25th on Plastics News' most-recent ranking of North American film and sheet manufacturers, with 1994 sales of $175 million.
The timing of the offer could signal that Huntsman is serious about expanding, despite the high price tag for chemical companies right now.
Paul Raman, a Paine Webber Inc. analyst in New York, said Huntsman could wait a year or two and get more for less money:``Huntsman's buying this business at or near the peak of the cycle. We think this is the wrong time to be buying chemical companies.''
Raman said Huntsman wants to round out its product line to compete with Dow Chemical Co. of Midland, Mich. Dow, which is expanding into PP and PET, is becoming a ``one-stop shopping place for packaging,'' he said.
Richard O'Reilly, an analyst for Standard & Poors Inc., a New York investment firm, said the offer for Rexene fits very well with Huntsman's track record.
Jon Huntsman ``has been on the prowl for a while, and he has a history of buying companies during downturns,'' he said in a telephone interview. ``We consider Rexene really a third-tier company, and it remains to be seen how badly Huntsman wants it. [Huntsman] has no history of doing hostile takeovers, but that's not to say it couldn't be done.''
At its main plant in Odessa, Texas, Rexene makes ethylene, propylene and styrene mono-mers, plus PP, polystyrene and PE resin.
According to Huntsman, Rexene has an annual capacity of 540 million pounds of ethylene, 210 million pounds of propylene, 320 million pounds of styrene, 420 million pounds of LDPE, 180 million pounds of PP, 225 million pounds of PE film and 60 million pounds of a specialty polymer used for roofing and a wrap for wire and cable. Rexene's plans also call for the production of 220 million pounds of LLDPE a year.
Rexene earned $65.4 million on 1995 sales of $615.2 million.Huntsman has annual sales of more than $4 billion.