Quarterly report [Sections 13 or 15(d)]

Note 3 - Business Combinations and Acquisitions

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Note 3 - Business Combinations and Acquisitions
 3 Months Ended
Mar. 31, 2025
Notes to Financial Statements  
Business Combination [Text Block]

3. BUSINESS COMBINATIONS AND ACQUISITIONS 

 

SEPARATION AND ACQUISITION OF ASSETS OF SLIC JOINT VENTURE 

 

On January 31, 2024, we completed the planned separation and acquisition of assets of Shanghai Lianheng Isocyanate Company Ltd. (“SLIC”), our joint venture with BASF and three Chinese chemical companies. The final purchase price of the acquired assets was determined based on an asset valuation that was completed in the second quarter of 2024. The acquisition of the assets was funded in part with Huntsman Polyurethanes Shanghai Ltd., our 70%-owned consolidated joint venture in China (“HPS”), issuing a U.S. dollar equivalent note payable at closing of approximately $218 million, which was repaid in full in the second quarter of 2024 using available funds at HPS. During the third quarter of 2024, we received approximately $64 million of cash from SLIC, of which $34 million was a dividend and $30 million was an interim liquidating distribution. Upon the full liquidation of the joint venture during the first quarter of 2025, all remaining cash of SLIC, primarily resulting from the proceeds received by SLIC, was distributed back to the joint venture partners. As such, during the first quarter of 2025, we received approximately $41 million of cash from SLIC, which was our final liquidating distribution.

 

The acquisition has been integrated into our Polyurethanes segment. Transaction costs related to this acquisition were not material during 2024.

 

We have accounted for the acquisition using the acquisition method. As such, we analyzed the fair value of net assets acquired. The allocation of acquisition cost to the assets acquired is summarized as follows (dollars in millions):

 

Fair value of assets acquired:

        

Accounts receivable

   $ 20  

Inventories

     10  

Property, plant and equipment

     231  

Other long-term assets

     24  

Deferred income taxes

     1  

Operating lease right-of-use assets

     3  

Noncurrent operating lease liabilities

     (3 )

Total

   $ 286  

 

The total fair value of the net assets acquired was in excess of the acquisition cost resulting in net gains of approximately $51 million recognized during 2024 and approximately $5 million recognized during the first quarter of 2025. Concurrent with the acquisition of net assets, we wrote off certain prepaid assets of approximately $71 million during 2024 related to operating agreements with SLIC and other joint venture partners.

 

According to the operating agreement of the joint venture, SLIC sold all of its output to the joint venture partners with no external sales. After the separation and acquisition of assets, we use all of the output of the acquired assets for internal use. As such, the acquired business has no external revenues or net income.