In an attempt to prevent Federal Trade Commission protests, Huntsman Corp. and Nova Corp. have removed Huntsman's North American expanded polystyrene plants from Nova's pending acquisition of Huntsman's styrenics business.
``This is the right thing to do given our strong desire to start capturing the considerable synergies of the deal,'' Nova President and Chief Executive Officer Jeff Lipton said in a news release.
Huntsman, based in Salt Lake City, will retain ownership of its EPS plants in Peru, Ill., and Mansonville, Quebec. The plants produce a combined 225 million pounds of EPS annually and employ 215.
Nova of Calgary, Alberta, still will acquire a 200 million-pound-per-year Huntsman EPS plant in Ribecourt, France, as well as 1.25 billion pounds of styrene capacity and 1.6 billion pounds of PS capacity.
Nova, which already has 365 million pounds of annual EPS capacity, would have more than half of the billion-pound-per-year North American EPS market by adding the Huntsman plants.
Nova's and Huntsman's combined share of the actual merchant market, however, could have been as high as 75 percent, since some EPS makers, such as Dart Container Corp. of Mason, Mich., and Wincup Holdings LLP of Phoenix consume all of their EPS internally and don't sell to outside markets, according to industry sources.
Officials have not determined yet how Nova's purchase price of $744 million will be affected by the EPS withdrawal. A $235 million stock package, which would make Huntsman Nova's largest shareholder also could be reduced.
The FTC has been reviewing the proposed acquisition since it was announced in late July. The deal would give Nova 2.1 billion pounds of North American PS capacity, pushing it past Dow Chemical Co. as the region's largest producer.
Nova officials said they were concerned the review of the EPS portion of the deal would delay federal approval and push the companies past their year-end target date for closing the sale.
``The sooner we can deliver the benefits on this, the better,'' Nova spokesman Rocco Ciancio said by phone Oct. 20.
Huntsman spokesman Don Olsen agreed, saying ``the important thing is that we get the deal done.''
``EPS has been a good business for us and Nova was able to let it go,'' Olsen said Oct. 20. ``This won't affect the overall deal.''
The proposal now will be sent to the FTC for final approval. Although the FTC has been conducting a preliminary review, it had not voiced any specific concerns about the EPS business to either company, Ciancio said.
FTC officials declined to comment on the case.
Huntsman's retracted EPS holdings now will become part of the firm's performance polymers business, which includes several high-end specialty grades of polypropylene, polyethylene and flexible polyolefins.
The impact of the EPS removal could be substantial, according to one industry insider, since that segment has shown the best profit margin in the overall PS business in recent years—though EPS sales and production are both down slightly this year.
``[EPS] is the most profitable part of the business,'' the source said. ``But I think [Huntsman and Nova] were concerned that if they threw it into the FTC, the FTC would say `Hey, wait a minute guys.'''