NEW YORK ( TheStreet) -- Chemicals company Huntsman ( HUN) said Tuesday it would acquire the performance additives and titanium dioxide assets of Rockwood Holdings ( ROC) in a deal valued at $1.1 billion. Terms of the deal also call for Huntsman to assume unfunded pension liabilities estimated at $225 million. The Woodlands, Texas-based acquirer said it intends to combine some of the assets to be acquired with its existing titanium dioxide unit with the hope of launching an initial public offering for the combined business within two years.
Read: Fall of the Bank Titans Huntsman said that post-deal it would be the world's second-largest producer of titanium dioxide, which is used to create white paint and coatings. Huntsman is also buying Princeton, N.J.-based Rockwood's color pigment business and chemicals that are used in the forestry, water treatment and rubber industries. "This acquisition provides a unique opportunity to unlock value within our pigments business and builds on the strong improvements we have made to its competitiveness," company CEO Peter R. Huntsman said in a statement. "The transaction announced today is the next step in our long-term value creation strategy for our pigments business." Huntsman said the company believes it can extract about $130 million in annual cost savings from the combination by the end of 2015. The deal values the Rockwood assets at about 5.5 times 2014 estimated adjusted Ebitda, or 3.3 times Ebitda should the cost saving targets be hit. For Rockwood, the deal continues an aggressive campaign to sell assets and revamp its business. The company in January 2013 announced plans to repurchase $400 million in common shares, pay down debt, increase the dividend and divest noncore businesses. The company in the months since has announced sales totaling $3.9 billion, including shedding its clay-based additives to British buyout firm Cinven Ltd. for 1.49 billion pounds ($1.98 billion) and its rheology business to Germany's Altana AG for $635 million. "With the sale of these businesses, we have successfully completed, ahead of schedule, all of our key objectives for 2013," Rockwood chairman and CEO Seifi Ghasemi said in a statement. "We remain committed to a disciplined approach in implementing our long-term business strategy, which is to further enhance shareholder value by creating a premier global specialty chemical company with market leading positions in all of its businesses." Bank of America Merrill Lynch was financial adviser to Huntsman and represented by Weil, Gotshal & Manges LLP. Vinson & Elkins LLP advised Huntsman. The Vinson & Elkins team consisted of Jeff Floyd, Steve Gill, Kai Haakon Liekefett, John Rosenkild, Han Gao, Bobak Fatemizadeh, Kelly Sanderson and Matthew Greenberg.