Venator Materials PLC Prepare for its IPO

Venator Materials IPO

Venator Materials PLC, the additives division for Huntsman Corporation was in the news in the middle months of 2017 when it was announced that an IPO would take place worth an estimated $477 million. This was equivalent to 28% of the division, which would still thus remain for the most part owned and completely controlled by Huntsman. This is perhaps not surprising when we remember that Texas-based Venator was created originally to receive much of Huntsman intellectual property, especially that company’s titanium dioxide business. Venator Materials, therefore, is a company which is focused on creating titanium dioxide products for use as pigments and also performance additives, timber treatments and water additives. The company is quite a large concern, employing 4,500 people and catering to customers in more than 100 countries. The titanium dioxide market worldwide was worth $17.7 by 2015 and was expected to continue to grow strongly until at least 2025. Bearing all of this in mind, why were many analysts expressing concern over the Venator Materials IPO. Indeed, why were many of these analysts advising their customers and readers to avoid the Venator Materials IPO?

Perhaps the best answer to this question and an explanation for why so much caution was and is being expressed about the Venator Materials IPO can be seen by looking at a small number of pertinent facts. For the year 2016 Venator’s top line revenues remained stagnant at an admittedly healthy $2.3 billion. There was also an increased gross margin and improving cash flows from its operations. To set against these positive signs was the announcement by parent company Huntsman that Venator Materials would greatly expand its debt during the Venator Materials IPO, up to $3.05 billion. In fact, it became apparent that the IPO was involved in the merger with Swiss-based Clairmont, which was announced around the same time as Venator’s forthcoming IPO. It seemed that Huntsman wished to monetize its pigments and additives division to help it through its looming merger, and this was one of the reasons behind the concerns expressed by some analysts about the IPO.

It seemed therefore that the Venator Materials IPO would be for a company with a fairly robust position in a market, the one for titanium dioxide, which is likely to continue to show strong growth in the future. However, to set against these positive signs were the facts that the IPO occurred against a backdrop of stagnant top-lines, a greatly increased burden of debt and also against backdrops of uncertainty about Huntsman’s immediate and future intentions. Venator Materials might well prosper as a producer of titanium dioxide products in the future but the specific backdrop against which the Venator Materials IPO played out was one which might well cause temporary but real concerns to potential investors. Would Venator be able to continue with their great increased debt burden and how would Huntsman react to any problems that the company might face? Only time would tell.

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