Outspoken Peter Huntsman looks to expand the family business

Peter Huntsman almost sounds like he's tempted to run for political office when he says the United States needs a leader to push for open, but fair global trade that would require countries to adopt similar labor, environmental and other regulatory policies to participate.

Huntsman is the chief executive of Huntsman Corp., The Woodlands-based petrochemical company founded by his father, Jon Huntsman Sr. And he is not unfamiliar with politics; his older brother, Jon Jr., is a former Utah governor who unsuccessfully ran for president in 2012.

"The world is getting to be a smaller and smaller place," Peter Huntsman said. "Society really need not fear that. Global trade, so long as it's done on a fair basis, is not our enemy."

As the international trading system faces upheaval following the election of Donald Trump in the U.S. and nationalist movements in Europe, Huntsman is leading his company through its own major changes. Huntsman Corp. is refocusing on specialty chemicals, divesting units that make low-margin base chemicals, and looking for acquisitions that will help it expand into more profitable lines of business.

The company is spinning off its division that makes titanium dioxide, a chemical used to make pigments for paints, food coloring and other products, into a stand-alone publicly traded company. At the same time, it has expanded plants in both Port Neches and Conroe to make more proprietary chemicals that go into laundry detergents, cosmetics, and other consumer goods.

"When Huntsman makes a product, I like to think we're one of maybe two or three in the world who can make the product," Peter Huntsman said. "Our competition is going to be less and our product lines are going to be more unique."

After the company went public in 2005, Huntsman moved the family business from Utah, where it was founded, to The Woodlands, where it would be closer to its plants, customers, and supplies of natural gas that provide the feedstock for petrochemicals. Huntsman today employs about 15,000 people in 30 countries, including more than 1,300 in the Houston area.

The company first hit it big more than more than 40 years ago making the cheap, plastic "clamshell" containers for McDonald's Big Mac burgers, but now focuses more on the specialty chemicals, plastics, foams and composite materials that go into Boeing airplanes, BMW cars and Nike shoes. Huntsman began the switch from common base chemicals to specialty products a decade ago.

"When people think of the chemical industry," said Huntsman, recalling the villain of a Batman movie, "by and large they probably think of something that's portrayed in most Hollywood movies of a highly polluted, bubbling green cauldron of something that the Joker falls into."

Huntsman is doubling down on his strategy by splitting the company into two publicly traded firms and creating a new pigments and additive business - name to be determined - that would be traded on the New York Stock Exchange. Huntsman Corp. became the world's second-largest pigments producer two years ago after buying more than $1 billion in plants from New York-based Rockwood Holdings.

Cyclical pigments

But the timing was bad, Huntsman admitted. The pigments business is cyclical, dominated by four or five large paint companies whose buying decisions drive the cycle up or down.

Huntsman said he bought the Rockwood assets at a good price during a cyclical low, but that trough lasted two years longer than expected and dragged down the value of Huntsman Corp. Last year, Huntsman reported an annual net profit of just $93 million, down 71 percent from 2014.

The pigments business is now recovering - global prices jumped in September - so the timing of the spinoff is right for getting higher share prices, said Hassan Ahmed, a chemical industry analyst for New York-based Alembic Global Advisors. Huntsman values the proposed new company at $3 billion.

The move should satisfy Huntsman shareholders that pushed for the company to shed the pigments business, Ahmed said. But it also shows that Huntsman is willing to take risks in an industry that generally fears change and clings to past successes, rather than looking toward future opportunities.

"Peter is out there making the right decisions - the bolder decision," he said. "The chemical industry has a long history of falling in love with the assets they have."

Huntsman had already proved that he's willing to leave once-cherished assets behind. About a decade ago, he decided the company needed to get out of base chemicals - commodity products, such as the plastic component ethylene, that are the same no matter who produces them. Companies compete only on price, resulting in tiny profit margins.

Even though it meant the company would get significantly smaller, Huntsman Corp. sold its European base chemicals business to the Saudi Arabia Basic Industries Corp., called SABIC, and its U.S. business to Koch Industries, for a combined $1.2 billion to pay down debt and shift focus to specialty products.

Big shoes

Spinning off the pigments business will again make Huntsman Corp. smaller. But Peter Huntsman doesn't expect that to last for long. He said the company is already eyeing potential mergers or acquisitions that could be made with proceeds from the spinoff and wouldn't rule out making deals before the new company goes public next year.

"We are probably more open to the idea of a potential merger than we would have been in the past," Huntsman said. "This company is poised to expand, and I like to think mergers is one of those areas."

Peter Huntsman, 53, took over the CEO role from his father in 2000 just as the company began faltering under heavy debts incurred from acquisitions made during a period of rapid growth. It was a challenging time for Huntsman - a college dropout who struggled with dyslexia - who had worked his way up the company ladder, starting as a truck driver.

"Nepotism I'm sure had its place," he joked.

Although his father, who remains executive chairman of Huntsman Corp., took a more active role, Peter Huntsman helped the company stave off bankruptcy by attracting a new financial backer, David Matlin, who specialized in investing in distressed companies. That led to Huntsman Corp. going public and the family losing a majority ownership stake. The Huntsmans own about 20 percent of the company today.

Despite the later problems, the expansion in the 1990s made Huntsman an international company and set the stage for its growth in and relocation to Houston. In 1994, Huntsman bought Houston-based Texaco Chemical, more than doubling Huntsman's size. Five years later, Huntsman took on much of the United Kingdom's Imperial Chemical Industries' assets, making Huntsman a global player overnight.

Locally, Huntsman employs 1,000 people in The Woodlands, including 300 at its nearby Advanced Technology Center. That's not counting additional workers at Huntsman's regional manufacturing facilities in Houston, Conroe, Alvin, Dayton, Port Neches and Freeport.

Now well-established in his job and industry, Peter Huntsman has become vocal on trade, economic and political issues. He donates money to both Republicans and Democrats, including the fiery Democratic Senate minority leader, Harry Reid of Nevada. He said this year's presidential election came down to the country's two least-popular people - Trump and Hillary Clinton - calling the election both astounding and pathetic.

In recent years, he has emerged as one of the biggest critics of exporting U.S. crude and liquefied natural gas - both of which began in the last 12 months. Restricting such exports, of course, would help American petrochemical companies, giving them access to bigger supplies at lower costs. But Huntsman argues that implications are broader than that.

U.S. jobs and economic growth are lost by exporting raw materials rather than higher-value finished products, he said. Instead of shipping natural resources overseas, manufacture natural gas into chemicals and plastics and refine oil into fuel, which can then be sold to foreign customers for more money. Trade is good, he said, but don't give up the value and jobs that can come from it.

"We've got fewer oil and gas jobs today, and we're exporting more than we ever have," Huntsman said of crude and natural gas. "That doesn't feel like we've accomplished a whole lot."