Ten months of rumors and wrangling came to an end June 9 when officials from Huntsman Corp. and Rexene Corp. agreed to merge the two companies.
Huntsman, based in Salt Lake City, will acquire all outstanding shares of Rexene common stock for $16 per share. The total value of the deal, which has been approved by each company's board of directors, is about $600 million. Huntsman officials said about half of that amount is Rexene debt.
Rexene of Dallas had previously spurned Huntsman's offers to acquire the company for $14 and $15 per share.
Rexene shareholders are scheduled to vote on the acquisition next month. The one-step deal is expected to be completed in 90 days.
Huntsman officials said the move will have no effect on Rexene's 1,300 manufacturing employees. Other personnel decisions are pending, officials said.
The merger gives Huntsman, which claims to be the largest privately held chemical company in the United States, a foothold in the polyethylene industry.
Rexene has annual capacity to produce 540 million pounds of ethylene, 320 million pounds of styrene, 420 million pounds of low density PE, 180 million pounds of polypropylene and 225 million pounds of PE film.
Huntsman's 1996 sales totaled $4.3 billion, including $468 million in film sales.
Huntsman's film sales placed the company seventh in Plastics News' 1996 ranking of North American film and sheet manufacturers. CT Films, Rexene's film division, ranked 33rd with $170.5 million in sales. The two companies' combined film sales of $638.5 million would have ranked fourth in Plastics News' 1996 ranking, trailing only DuPont Co., Bemis Co. Inc. and First Brands Corp.
``We have maintained our interest in Rexene because of the extraordinary synergies and efficiencies that would result from a merger of our two companies,'' Huntsman Chairman and Chief Executive Officer Jon Huntsman said in a prepared statement. ``We greatly respect [Rexene Chairman and CEO] Andy Smith and believe Rexene has built strong value in this business.''
In a June 10 telephone interview, Smith said Rexene's unique approach of focusing on providing smaller amounts of customized PE and PP to specialty customers ultimately made the 37-year-old company attractive to Huntsman.
``We started with the customer and worked backwards,'' Smith said. ``It's not compatible for a big linear low density PE manufacturer to run two hopper cars for a customer.''
Smith said that approach also helped Rexene pull itself out of bankruptcy in 1992. The company, which had a negative net worth when it came out of bankruptcy, is now worth $180 million, according to Smith.
Smith's own role after the merger has not been decided, he said.
Huntsman spokesman Don Olsen said the merger would allow Huntsman to produce personal-care films such as diapers, as well as films for agricultural and medical packaging.
The merger continues the aggressive acquisition pace for Huntsman's films unit, which formed in 1992 from the purchase of film plants from Mobil Chemical Co. and Goodyear Tire & Rubber Co.
Huntsman's biggest chemical industry acquisition occurred in April 1994 when it bought Texaco Chemical for $1.04 billion. Other recent Huntsman acquisitions include Deerfield Plastics Co., Amoco Chemical Co.'s polystyrene business and United Films Corp., all purchased between August and November last year.
The acquisition attempt became more public early this year when a pair of Wall Street firms that own 10.1 percent of Rexene said the company should accept Huntsman's offer. The companies — Wyser-Pratte & Co. Inc. and Spear, Leeds & Kellogg — later pushed to remove Rexene's board of directors.
The merger became almost certain six weeks ago when Huntsman began a due diligence review of Rexene's financial records.
The shareholder uprising was not the driving factor behind the merger, according to Rexene spokesman Neil Devroy.
``If Huntsman wanted to acquire Rexene for $16 a share, they would have,'' Devroy said. ``Wyser-Pratte certainly heightened shareholder awareness, but I don't think they were more involved than any other large shareholder would have been.''
Balaji Singh, president of Houston's Chemical Market Resources Inc. consulting firm, said Rexene will be missed because of the unique niche it had in the field.
``I'm sad to see Rexene go because of their individuality,'' said Singh, whose firm featured Rexene in the February issue of its ``New Generation Polyolefins'' publication. ``This is more than a move up for Huntsman, they're gaining a specialty market.''