By Stephen Mayne

A lot has been written about Kerry
Packer’s various business interests over the past two weeks, but one
element which is rarely mentioned is his large chemical operations.

Having
received $800 million in cash from Alan Bond in 1987, Packer ploughed
$130 million into buying Monsanto’s Australian’s operations, which were
renamed Chemplex Australia and based around its West Footscray plant,
as you can see here.

Given
the giant explosion at Coode Island in 1991, this was always going to
be a contentious investment and Packer preferred as little public
exposure as possible. The Bracks government, through the Victorian
WorkCover Authority which is chaired by James Packer’s mate James
MacKenzie, gave the controversial West Footscray site a three-year
licence in 2003 to operate a “major hazard facility,” as you can see here.

But tougher regulations ended local supplies of raw material and The Agereported that the global Huntsman business took a $66 million write-down on the West Footscray plant in September last year.

In
what was certainly seen as an odd alliance at the time, Packer sold
half the Chemplex Australia business to Salt Lake City-based Mormon Jon
Huntsman for $70 million in 1993. The two then joined up
later that year to buy Texaco’s US chemicals business for $US1 billion,
although Packer’s original 50% stake in this venture was subsequently
cut to 20% or $US200 million. In December 1998 Huntsman Australia also
purchased Orica’s surfactants business in Botany for $155 million.

The
chemicals business has long been highly cyclical, and Packer is said to
have enjoyed good returns in some years, but he should have got out of
Huntsman before it started making losses in 2001, despite annual
turnover of almost $20 billion. This is what The SMH reported in 2003:

Globally, all of the Huntsman operations are being rolled
into a single consolidated entity, including the US and local interests
with the Packer family. In the middle of 2002 Huntsman began
negotiations with bondholders including the Packer family, which had
built up a stake of 14 per cent of Huntsman’s outstanding bonds.

Bondholders
emerged with 49 per cent of the equity, with the Huntsman family
retaining 51 per cent and full management control. For the Packer
family, this translates to around a 7 per cent holding in the
underlying equity of Huntsman Corp, which is to be taken public over
the next few years. If not, the Packer family or the other player in
Huntsman, vulture fund MatlinPatterson (the same outfit which made a
killing out of Anaconda Nickel) has the right to push for either an
initial public offering or a sale of assets.

The size of the
Packer family’s investment is unknown, but the value tied up in
Huntsman is approaching $US400 million, ranking it as one of the
family’s largest single investments.

Fast forward a
couple of years and Huntsman was indeed forced to float and the Packer
stake debuted at only $US131 million, as you can see fromthis story in The Age last February. As you can see here,
Huntsman shares have performed poorly over the past year, slumping from
$US28 to $US17, although it has now recovered to $US20 after finally
getting back into profit last year. The latest SEC filings show total assets of $US8.78 billion and total liabilities of $US7.13 billion, so the operation remains highly geared.

Jon
Huntsman’s fortune has waned in recent years but he was famed for a
$US100 million donation to fight cancer in 1995 and Kerry Packer is
listed here
as having contributed to $US41 million in other pledges that Huntsman
rounded up. Australian press reports at the time put his contribution
at $13 million.

Jon Huntsman has publicly spoken about his
“special relationship” with Packer, but if the 7% stake is still held
don’t be surprised if it is one of the first things that James Packer
sells because it has been a sorry few years for the family’s chemical
plays.

Peter Fray

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