Jon Huntsman had sought nary a dime from the investing public to turn his little Utah chemical concern into a multibillion-dollar empire, relying instead on shrewd deals and exacting cost controls for 25 years.
Then, in April, the inventor of the Styrofoam hamburger package tapped the bond market for the first time to fund the $860 million purchase of Texaco Inc.’s chemical business. He even started talking about taking about 10 percent of the Huntsman companies public.
Why sell now? To give the proceeds away, of course, to a list of favored causes, his nine children and 24 grandchildren.
If the plan sounds incongruous, well, that’s Jon Huntsman-a hard-nosed negotiator with plans to endow a $1 billion charitable foundation; a time-starved workaholic who drops everything to comfort an employee whose son has just died; a boy who begged for food and a man who gives extravagant gifts.
Those who know Huntsman well say these are not incongruities, but the result of a childhood that would have hardened lesser men. Instead, years of poverty and back-breaking Idaho potato farming gave Huntsman, 55, an empathy uncommon in billionaire magnates.
If an emotionally charged management style is a luxury in an age of cutbacks, Huntsman can afford it. Huntsman Chemical Corp., Huntsman Packaging Corp. and other Huntsman companies together have been profitable every month since 1985, Huntsman said. If chemical prices continue a recovery, operating cash flow could double 1994 expectations of $400 million and revenue could top $4.5 billion, he said.
Produced in 60 facilities across 17 nations, Huntsman’s chemicals are used in everything from cars to computers, and his packaging products hold everything from take-out meals to eggs.
It was in his in-laws’ egg business that Huntsman in the 1960s cracked his first success: reducing cracks with a polystyrene carton. Next came the clamshell packages that would hold millions of Big Macs before Styrofoam piqued environmental concern.
Family-oriented from the start, the devout Mormon hired one of his first salesmen fresh out of college after meeting him at a Huntsman-led couples group. Ronald Rasband is now Huntsman Chemical president, but the message has been the same at every stop along the corporate ladder, he said.
“Everybody in this company feels an ownership, feels an empowerment, to do their job,” Rasband said, “because they’ve heard the owner stand up and say, `You’re the president of that job, and if you do your job and I do my job, this will be the best company in the world.’ “
But the tender facilitator turns into a tough negotiator when he spies an undervalued company, refusing to pay more than 50 percent of its replacement cost. In 19 acquisitions since 1983, Huntsman has shown an uncanny knack for predicting the chemical industry’s swings, grabbing big discounts on the brink of industry recoveries.
Since 1993 Huntsman has purchased Chemplex Australia Ltd. in a joint venture with Consolidated Press Holdings Ltd.; an Elf Atochem unit; Eastman Chemical Co.’s polypropylene business; two Monsanto Co. businesses and, recently, Texaco Chemical Corp.
Once purchased, the “Huntsman mystique” is applied to company operations. That’s when Huntsman proves himself as fierce a cost-cutter as negotiator, slashing overhead to the Huntsman company average of 4.5 percent of revenue, compared with the industry’s 8 percent average. Plants must operate at 100 percent capacity.
“We are very lean,” Rasband said. “We are very hesitant to add people, we’re very hesitant to add costs. We don’t have limos, we don’t have country clubs, we don’t have golf clubs.”
Even necessary costs are pared-shared by Huntsman companies operating in roughly the same businesses. “Huntsman has the ability to put more critical mass to the running of that business,” Texaco Vice Chairman Allen Krowe said of the unit sold to Huntsman.
It was the Texaco sale that, for the first time, proved too rich for even Huntsman’s blood. He financed most of the deal with two first-mortgage notes totaling about $600 million and has been talking about an initial public offering ever since.
“If you’ve already crossed that line, there’s really no reason to prohibit yourself from entering the public equity markets down the road as well,” said Richard Durham, Huntsman companies’ chief financial officer and Huntsman’s son-in-law.
Those not related to Huntsman aren’t always so sure. Before buying Huntsman stock, they’re likely to wonder how his nepotistic empire-with sons Peter, Paul, David and Jon Jr. all in key positions-might fare without him.
“When you talk about family members coming into the business, it’s not like you’re bringing in neophytes,” said Jon Jr., who said the company is capable of replacing family members, but probably won’t have to. “I’m quite confident that we have a very good bunch of second-generation personalities involved today. I think they will weather a public offering extraordinarily well.”
If bond-raters are any indication, Wall Street isn’t as certain. Standard & Poor’s Corp. rated Huntsman’s first-mortgage notes a low double B-minus.
Moody’s Investors Service Inc. was no more generous, citing high interest expenses and continued pressure on commodity profits for its B1 rating. The Moody’s rating also reflected uncertainty about debt levels at other Huntsman companies.
“If the other companies are also leveraged, how much support can they provide to this company?” said Moody’s John Urquidi. “When that information is not available, we have to be conservative and assume certain things.”
Still, it seems unlikely that Huntsman would tolerate being short of cash, since that could force him to miss out on another prime acquisition. “I don’t want to utilize all of the arrows in our quiver,” he said, “because there is always an opportunity when one isn’t looking toward it or expecting it.”
It seems just as unlikely that Huntsman would risk the sting of being cash-poor again. “I remember too vividly going into meat markets with my mother after they closed to ask for the leftovers because we couldn’t afford to buy meat,” he said.
Neither can Huntsman forget those for whom poverty is more than a memory. With his family and companies, Huntsman said, he’s given away as much as $50 million in five years, including more than $11 million for cancer research at the University of Utah.
Although Huntsman says his mouth cancer is in remission and his prostate cancer was cured in a 1992 operation, he is sympathetic to families struck by the disease that took both his parents.
“If it was just the money we were trying to make in our lives, we would have long ago ceased running our businesses,” Huntsman said. “Clearly, the mission of our life is not to build a great chemical company as much as to have done something for mankind that was substantial and that was of equal proportion to what we’ve received.”
Although such sentiment is an integral part of Huntsman’s persona, it could go against the grain on Wall Street, where public companies often take priority over public welfare.