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Archroma in $718 Million Deal for Huntsman’s Textile Effects Division

Roughly seven months after putting Textile Effects up for strategic review, Huntsman found a buyer for the dyeing division in Archroma, the companies announced Tuesday.

“We at Archroma are so very excited to announce what we see as a merger of equals,” Archroma CEO Heike van de Kerkhof said of the $718 million deal expected to close in the first half of next year. “With this agreement, two committed leaders in sustainable and innovative solutions unite to pave the way towards a more sustainable textile industry. We are delighted to welcome a team of highly talented people. Innovative and transformative leadership is not built overnight, and we are eager to work together with the people who made that happen at Huntsman Textile Effects.”

Peter Huntsman, chairman, president and CEO of Huntsman, said SK Capital, which counts Archroma as a portfolio company, emerged as the “better owner of the business over the long-term than Huntsman.”

“After closing, Textile Effects will combine with SK Capital’s Archroma business to create a world leader in textile chemicals and dyes, with a leadership in sustainability and innovation,” he added.

Both Archroma and Textile Effects are founding members of Sustainable Chemistry for the Textile Industry (SCTI), an alliance promoting sustainable, state-of-the-art chemistry solutions that protect leather and textile factory workers, local communities, consumers and the environment. Archroma recently helped Tom Tailor create its Good Dye range of 100 percent organic cotton basics dyed with the former’s EarthColor pigments derived from agricultural and herbal waste.

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Tom Tailor used Archroma EarthColor for the Good Dye range of 100 percent organic cotton basics.
Tom Tailor x Archroma EarthColors

Over the 12 months ending June 30, the Textile Effects division reported sales of $772 million and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $94 million, according to Huntsman, which anticipates cash taxes on the transaction of approximately $50 million.

Huntsman Textile Effects produces innovative textile dyes, chemicals and digital inks to brands and retailers around the world. Its textile solutions provide color and enhance the aesthetic, durability and performance of finished textiles, including functionality such as wrinkle resistance and water and stain repellence.

Huntsman Textile Effects develops sustainable textiles with advanced technology such as non-fluorinated durable water repellence and eco-friendly digital printing. Its Avitera reactive dyeing technology meets global industry environmental standards and helps textile mills increase yield, improve productivity and reduce processing costs by significantly reducing water and energy consumption. Huntsman Textile Effects operates 13 synthesis and formulation production sites in Asia, Europe and the Americas.

The total enterprise value of the transaction is approximately $718 million, which includes the assumption of about $125 million in net underfunded pension liabilities as of Dec. 31. The acquisition is being partially funded with preferred equity, of which Huntsman is taking up to $80 million, an amount SK Capital Partners will seek to syndicate prior to the transaction closing.

Huntsman said the company expects the cash proceeds from this divestiture to be deployed in-line with the company’s current balanced capital allocation program that includes strategic investments and acquisitions to further strengthen its core businesses, as well as returning cash to shareholders through both its dividend and share repurchase program.

SK Capital Partners co-founder Barry Siadat said the transaction will merge the “technologies, products and capabilities of the legacy pioneers of the textile industry, namely Ciba, Sandoz, Hoechst and BASF, into a modern and cohesive enterprise that is focused on delivering innovative and sustainable systems and solutions to serve the evolving needs of today’s textile industry.”

Huntsman, a publicly traded global manufacturer and marketer of differentiated and specialty chemicals with 2021 revenues of approximately $8 billion, intends to report Textile Effects as discontinued operations beginning in the third quarter of 2022. The transaction is subject to regulatory approvals and other customary closing conditions.

BofA Securities is serving as Huntsman’s financial advisor and Kirkland & Ellis LLP is acting as its legal advisor. Citi served as financial advisor to Archroma. Latham & Watkins LLP provided corporate legal advice and Kirkland & Ellis LLP provided financing legal advice to Archroma.