(CN) – Shareholders claim in a class action that a fire ravaged one of Venator Material’s overseas facilities beyond repair but the company allegedly downplayed the extent of the damages before an initial public offering.
Venator, based in the United Kingdom, manufacturers and markets chemical products, primarily titanium dioxide. The lawsuit was filed in the District Court of Dallas County, Texas, against Venator, subsidiary Huntsman (Holdings) Netherlands B.V., and several Venator senior officers and underwriters.
Huntsman announced a spin-off of its Pigments and Additives Division into a new entity called Venator on Jan. 17, 2017, where Venator retained the titanium dioxide and performance additives segments of the business. “The titanium dioxide business represented the majority of the company’s revenues,” the lawsuit says.
On Jan. 30, 2017, a fire destroyed Venator’s main plant for manufacturing titanium dioxide located in Pori, Finland. According to the lawsuit, investors were unaware that the damage was so extensive that it would cost more than $1 billion to repair the facility, well above the company’s $500 million insurance policy limit. Instead, following the fire, Huntsman issued a press release stating that a “fire brigade responded quickly and extinguished the fire.”
The lawsuit alleges that after the fire, Huntsman reorganized what was to be a tax-free- spin-off into an initial public offering in May 2017, so that the shares would not be distributed to existing Huntsman investors, but instead offered to the public. Venator grossed over $522 million from the IPO but the proceeds went to Huntsman and not Venator, the suit alleges. Huntsman followed the IPO with a secondary offering in November 2017 for Venator that garnered over $533 million in proceeds where, again, the proceeds went to Huntsman instead of Venator.
The lawsuit contends that the registration statements filed in connection with the IPO and SPO were untrue, allegedly omitting the true extent of the fire damage and that the facility “was significantly more likely to be abandoned by Venator than rebuilt.”
By Dec. 17, 2018, Venator shares fell to $3.65 per share, 82 percent below the IPO price, and 84 percent below the SPO price.
Shareholders are represented by Joe Kendall and Jamie J. Gilmore of Kendall Law Group in Dallas and Brian E. Cochran of Robbins Geller Rudman & Dowd LLP in Chicago.