Applied Extrusion Technologies Inc.'s board of directors unanimously rejected Huntsman Packaging Corp.'s $116 million purchase offer for the oriented polypropylene film extruder.
An AET executive said the offer ``failed in all material respects to serve the best interests of AET's shareholders.''
The Aug. 14 rejection came three days before Huntsman of Salt Lake City had planned to withdraw its offer if AET had not acted on it. Huntsman officials had said they wanted to gain AET's share of the OPP film market.
AET's rebuff may not be the last word on the offer.
``We fail to see how a 48 percent premium in stock price is not in the best interest of shareholders,'' said Huntsman spokesman Don Olsen. ``Having said that, we are weighing our options and will determine our next best course of action.''
AET's recent acquisition of Montell NV's global films business ranks AET second globally behind Mobil Chemical Co. Huntsman's packaging business is focused on polyethylene and PVC film.
Huntsman had offered $10.50 per share for Peabody, Mass.-based AET, a price 48 percent higher than AET's average stock price for the previous month. News of the Huntsman offer led AET's stock price to climb from $7 per share Aug. 7 to $9.25 per share Aug. 14.
In explaining the decision, AET Chairman Amin J. Khoury said the company was well positioned to capitalize on such moves as the Montell purchase, which roughly doubled AET's size.
``Given these prospects for the company's business, the board's choice was easy,'' Khoury said in a news release.
He added that AET's strategic initiatives will help it through a cyclical trough brought on by slumping film and resin prices and the industrywide start-up of seven new large-scale film lines.
AET officials could not be reached for further comment at press time.
Huntsman Packaging ranked eighth in Plastics News' 1997 ranking of North American film and sheet manufacturers with $590 million in sales. AET ranked 21st with $240 million in film and sheet sales. The company's total sales are $262 million.
AET's rejection was anticipated by Tim Burns, president of the Cranial Capital Inc. consulting firm in Chagrin Falls, Ohio. In an Aug. 13 phone interview, Burns said AET might hold out since the company had not yet seen the earning power and potential savings of its recent maneuvers.
Burns added the bid ``makes great strategic sense'' for Huntsman, which has a reputation for being a smart buyer and buying at the bottom of business cycles.
AET's value could be affected by differing opinions on where the packaging industry is in the current cycle, Burns added.
``AET is just like everyone else in a down cycle,'' he said. ``You can introduce new products and make acquisitions, but that doesn't save you from market pricing downturns.''
Olsen said Huntsman Packaging's bid on AET would not affect the future of Huntsman Corp.'s PP business.
``We see oriented polypropylene film as a new growth platform regardless of where the raw material comes from,'' Olsen said. ``Huntsman Packaging buys raw material from wherever it can, not just from Huntsman.''
Huntsman Corp., Huntsman Packaging's parent company, sold its polystyrene and styrene business to Nova Corp. last month, less than a year after the company announced it intended to move away from cyclical commodities and more into specialty chemicals.