Treasury Practice

Problem Solved: Peter Vanderpoorten, Huntsman

Published: May 2006

Huntsman has grown rapidly largely through acquisitions and with the growth, it has inherited dealings with different banks, account structures and ERP systems. However, with the help of Deutsche Bank as its main cash management bank in Europe, it implemented the IDOC format as its uniform payment system.

Peter Vanderpoorten

Director of Global Treasury Services

Huntsman is a global petrochemical manufacturer, producing chemicals for a wide range of industries including healthcare, aviation, textiles, detergents and plastics. Based in the US and with 62 entities in 22 countries worldwide, it currently has 11,300 employees.

Problem…

When Huntsman was founded in 1970 it had a turnover of $12,000. Since then, this figure has grown to $12 billion. This rapid growth has largely been achieved through acquisitions, including Texaco Chemical Company in 1994, three divisions of ICI in 1999 and the Vantico Group in 2003. As a result, Huntsman has been faced with the issue of integrating these acquired entities and divisions into the existing company structure. Along with the acquisitions came a variety of banks, different bank account structures, different electronic banking applications and different ERP systems. Legal entities were operating in a decentralised, self-standing way, with each subsidiary responsible for invoicing customers and paying suppliers.

…solved

In recent years, the company has been working towards standardisation, simplification and centralisation. Regarding corporate structure, Huntsman was reorganised from three parent companies into one. From the point of view of IT infrastructure, the company chose SAP as its standard and moved almost all the businesses to this platform. In order to simplify and centralise administrative processes the company introduced the SBE (Single Business Entity) concept in Europe. As part of the standardisation process, Huntsman also chose a centralised approach for its treasury structure. Huntsman’s European cash management business was centralised in Brussels using one main bank throughout Europe. A payment factory was also set up in one single entity in order to manage payments from a central point for various businesses.

In 2003, Huntsman went out to tender and chose Deutsche Bank as its main cash management bank in Europe. The decision was based on the key criteria of products and services, pricing and geographical coverage in Huntsman’s countries of operation. Peter Vanderpoorten, Director of Global Treasury Services at Huntsman, identifies two key roles performed by Deutsche Bank. “Firstly, as our main bank in Europe, they not only helped us to set up the European cash pools, but they also supported us with our plan to set up payment factories – how to organise them and how to implement one uniform payment format, the IDOC file.” The second role is to assist with the integration of acquisitions. “When you have a main bank you are true partners. When we make acquisitions, we contact Deutsche Bank very early on to think with us and to give their opinions and alternatives in order to best integrate the new company into existing treasury structures.”

On the liquidity side, Huntsman worked with Deutsche Bank to implement cash pools in different currencies for the European entities. The next step was to set up a payment factory. “Instead of having various banks with different communication tools and payment formats we decided to go for a uniform solution,” explains Vanderpoorten. “As Deutsche Bank was already our cash management provider in several countries it was possible to use the same payment procedure with the uniform payment format, i.e. the IDOC format. The fact that Deutsche Bank is SAP certified and that they are able to accept IDOC files, as they are produced by our SAP system, made the integration easier. So now a payment request is approved locally and is sent to the central entity, which automatically loads this payment request into db-direct internet.” Ultimately, Vanderpoorten plans to use two or more payment factories in Europe – at least one in Holland and one in the UK. “There is a limit to centralisation, driven by business or tax or legal reasons. You cannot centralise everything.”

As a company driven by acquisitions, the integration of new subsidiaries is also of key importance to Huntsman. In March 2006, it decided to acquire Ciba’s Textile Effects division, a deal which is set to be completed during 2006. Vanderpoorten explains that Deutsche Bank is helping Huntsman to prepare for this. “We will need to set up new bank accounts and integrate them in our cash pool or maybe rethink our existing structure in light of the new created situation and therefore Deutsche Bank is involved early in the game to check what is possible, what is not. We will work closely together with them to decide upon the best solution.”

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