Huntsman Corp.'s possible purchase of Rexene Corp. advanced a step last week, as Huntsman signed a confidentiality agreement and launched a financial review of the rival resin and film manufacturer.
Huntsman of Salt Lake City has made three attempts to purchase Dallas-based Rexene's stock in the past year, for $14, $15 and $16 cash per share. Each attempt had been rejected, but Rexene's board of directors has stated publicly it does not oppose a sale to Huntsman at $16 per share in an all-cash transaction, according to Rexene spokesman Neil Devroy.
Under the confidentiality agreement, Huntsman agrees not to use any information gained during its due diligence review of Rexene to compete in the marketplace.
The $16 per-share proposal would have a $550 million cash value and include taking on $250 million in Rexene debt. It is Huntsman's final offer, according to an April 24 letter from J. Kimo Esplin, Huntsman's senior vice president and chief financial officer, to Andrew Smith, Rexene's chairman and chief executive officer.
Rexene has postponed a special April 30 shareholders meeting until May 22 because of the new developments.
In addition to a recently opened polypropylene plant in Odessa, Texas, Rexene operates four U.S. film plants, one film plant in England, and other facilities that produce low density polyethylene and styrene. The 37-year-old firm has seen its stock climb from a $3 share cost in 1993 to its current value of $14. It reported sales of $587 million in 1996.
Rexene's annual production stands at 540 million pounds of ethylene, 320 million pounds of styrene, 420 million pounds of LDPE, 180 million pounds of PP and 225 million pounds of PE film, according to Huntsman.
Huntsman, with $468 million in film sales, ranked fifth in Plastics News' 1996 ranking of North American film manufacturers. The company's total sales were $4.3 billion in 1996 and are expected to reach the $5 billion mark this year.
Several other companies have inquired about purchasing Rexene, but none have made formal offers, according to Devroy.
In his letter, Esplin objected to the financial documentation Rexene requested of Huntsman, claiming other interested companies were not required to do the same.
``We trust that for the benefit of Rexene's shareholders, Rexene will not use frivolous arguments and excuses to deny your shareholders the real value of our genuine proposal,'' Esplin wrote.
Devroy added he believes Rexene has become attractive to potential buyers because the company ``has a very strong position in the specialized chemical industry and has significantly improved its financial condition over the past three years.''
Huntsman spokesman Don Olsen agreed, saying Rexene was ``an excellent fit'' for Huntsman. ``We produce many of the same products, such as ethylene, styrene and polypropylene,'' he said.
Olsen declined further comment on the possible sale because of the confidentiality agreement.
Neither Rexene's Smith nor Huntsman Chairman and CEO Jon Huntsman was available for comment.