July 6, 2007

Research Associate: Archana Sultania, M.com, PGDFM.

Editor: R.C. Fuhrmann, CFA

Sr. Editor: Ian Madsen, CFA: 1- 800-767- 3771: x9417

www.zackspro.com 111 N. Canal Street, Suite 1101 l Chicago, IL 60606

HUNTSMAN CORPORATION / (HUN-NYSE) / $20.14

Note to Readers: All new or revised material since the last report is highlighted.

Reason for Report: Apollo makes a Higher Bid for HUN than Basell. Previous Edition: May 11, 2007

Recent Events

July 9, Apollo Management raised its offer for HUN.

July 3, HUN received a proposal to be acquired by Apollo.

July 2, HUN’s Textiles Effects business signed an agreement to acquire the Baroda division of Metrochem Industries Ltd.

June 26, Basell and HUN signed an agreement to acquire Huntsman.

On May 2, 2007, HUN said that it is raising prices for all MDI products in the North American Free Trade Agreement region to offset higher materials costs.

Overview

Salt Lake City, Utah based Huntsman Corporation (HUN or the Company) is engaged in the manufacture and marketing of differentiated and commodity chemical products. It operates in six segments. The Polyurethanes segment includes products such as MDI, PO, polyols, PG, TPU, aniline, and MTBE. The Advanced Materials segment offers epoxy resin compounds and formulations; cross-linking, matting, and curing agents; epoxy, acrylic, and polyurethane-based adhesives; and tooling resin formulations. The Performance Products segment produces amines, polyetheramines, propylene carbonates, ethylene carbonates, ethyleneamines, ethanolamines, substituted propylamines, morpholine, surfactants, linear alkylbenzene, maleic anhydride, other performance chemicals, glycols, and technology licenses. The Pigments segment offers titanium

dioxide products. Polymers products include propylene, polypropylene, polyethylene, expandable polystyrene (EPS), EPS packaging, APAO, LDPE, and LLDPE. Base Chemicals segment offers olefins and aromatics, such as ethylene, propylene, butadiene, benzene, cyclohexane, paraxylene. HUN serves various industries, including adhesives, aerospace, automotive, construction products, durable and non-durable consumer products, electronics, medical, packaging, paints and coatings, power generation, refining, and synthetic fiber industries.

Analysts have identified the following key factors for evaluating the investment merits of HUN:

Key Positive Arguments / Key Negative Arguments
Leader in MDI, maleic anhydride advanced materials: Strong position and continued growth in these platforms expected to boost bottomline results. / Increasing costs: HUN is exposed to oil and natural gas volatility. A continuous rise in these key raw materials for ethylene production could limit profitability.
Debt reduction: With an estimated $2,000.0M of free cash flow, HUN is expected to be able to pay down debt over the next few years. / Pricing pressure in MDI: Deterioration of pricing discipline owing to rising capacity may hurt earnings.
Upturn in the ethylene cycle: The upturn in the ethylene cycle could boost HUN’s earnings. / Environmental regulations, MTBE phase out: Several states, including California, New York and Connecticut, have phased out the use of MTBE. Several other states may follow suit. There has been legislation seeking nationwide bans of MTBE by FY07.

Further information on HUN is available at its website at: http://www.huntsman.com.

The Company’s fiscal references coincide with the calendar year.

Recent Events

On July 9, 2007, Apollo Management raised its offer for chemical company HUN by 2.8% to $6.5 billion or $28.00 per share in cash, widening the premium over rival suitor Basell. The new offer, up 75 cents a share from Apollo's previous bid of $27.25 a share, was made through Apollo's Hexion unit. Dutch-based Basell (BASL.UL) is also bidding to acquire Huntsman.

On July 3, 2007, HUN announced that it received from Hexion Specialty Chemicals an entity owned by an affiliate of Apollo Management, L.P., a proposal to acquire all of the outstanding common stock of Huntsman for $27.25 per share in cash. The Hexion Proposal is subject to termination of Huntsman's previously announced merger agreement with Basell AF and the execution of a definitive merger agreement with Hexion. The Hexion terms include that Hexion will have up to 12 months, subject to a 90-day extension in the judgment of the Huntsman Board of Directors under certain circumstances, to close the transaction and that the cash price per share to be paid by Hexion will increase at the rate of 8% per annum (inclusive of any dividend paid) beginning nine months after a definitive merger agreement is executed. The required financing for the Hexion Proposal is fully committed. Furthermore, the proposal does not include a financing condition. The Hexion Proposal also includes a $325 million reverse break-up fee payable by Hexion to the Company in the event the transaction does not close due to the failure to obtain regulatory clearance or requisite financing. The Hexion Proposal provides for a $225 million termination fee payable by Huntsman in the event of certain terminations by Huntsman in connection with the exercise by the Board of Directors or the Transaction Committee thereof of its fiduciary duties.

On June 26, 2007, Basell, the global leader in polyolefins' technology, production and marketing, and Huntsman Corporation, one of the world's largest manufacturers and marketers of differentiated chemicals and pigments, announced that they have signed a definitive agreement pursuant to which Basell will acquire HUN in a transaction valued at approximately $9.6 billion, including the assumption of debt. Under the terms of the agreement, Basell will acquire all of the outstanding common stock of Huntsman for $25.25 per share in cash. The Basell agreement may be terminated under certain circumstances, including if the Company receives a superior proposal and provides advance notice to Basell. If the Basell agreement is terminated under these circumstances, Basell will be entitled to a $200 million payment.

On June 25, 2007, Huntsman Corp. announced that it will record an impairment charge of $250 million to $270 million in the second quarter as a result of the planned sale of its U.S. chemicals and polymers business.

On May 2, 2007, HUN said that it is raising prices for all MDI products in the North American Free Trade Agreement region to offset higher materials costs.

Revenues

Revenues in 1Q07 were $2,647.3M, a decline of 0.35% from $2,656.7M in 1Q06.

Segment revenue details are as follows:

Polyurethanes: Revenues in 1Q07 were $840.0M, up 3.8% from $809.1M in 1Q06, attributable to higher sales volumes, partially offset by lower average selling prices. MDI (methylene diphenyl diisocyanate) sales volumes increased 5% attributable to strong growth in Asia and Europe, partially offset by lower demand in the Americas. MDI average selling prices increased 2% primarily as a result of the strength of major European currencies versus the U.S. dollar. In local currencies, average selling prices were lower in Asia and Europe and relatively unchanged in America. MTBE sales volumes and selling prices decreased owing to reduced U.S. demand as a result of changes in U.S. legislation.

Materials and Effects: Revenues in 1Q07 were $589.6M, up 82.5% versus $323.1M reported in 1Q06, attributed to the acquisition of the textile effects business. The textile effects business contributed $242.7M in revenue for the three months ended March 31, 2007 while the advanced materials business revenues for the same period increased by $23.8M or 7% to $346.9M. The increase in advanced materials revenues was attributed to a 10% increase in average selling prices, partially offset by a 2% decline in sales volumes.

Performance Products: Revenues in 1Q07 were $551.9M, up 8.2% from $509.9M posted in 1Q06 attributable to a 10% increase in sales volume, partially offset by a 2% decline in average selling prices. Sales volumes increased primarily attributable to increased ethylene by-product sales and increased volumes in performance specialties. Average selling prices decreased due to lower raw materials costs and changes in product mix.

Pigments: Revenues in 1Q07 were $270.2M, up 4.4% from $258.8M posted in 1Q06. Sales volumes increased 2% because of strong customer demand in Latin America, Middle East and Africa. Average selling prices increased 3%, primarily attributable to the strength of European currencies versus the U.S. dollar, partly offset by lower local currency average selling prices in Europe and North America.

Polymers: Revenues for 1Q07 were $410.9M, down 2.9% from $423.5M in 1Q06. A 6% decrease in average selling prices, primarily in polyethylene product line, was partially offset by a 5% rise in sales volume attributable to improved demand.

Base Chemicals - Revenues in 1Q07 were $132.6M, down 70.4% from $447.3M in 1Q06. Lower sales volumes caused by an outage at the Port Arthur, Texas olefins manufacturing facility and the divestiture of certain U.S. butadiene and MTBE assets drove the decline in the quarter’s results.

The Company expects growth from its polyurethanes business in FY07, spurred by strong demand for its products in Asia and Eastern Europe.

Total Revenue ($M) / 1Q06A / 2006A / 1Q07A / 2Q07E / 3Q07E / 4Q07E / 2007E / 2008E / 2009E
Polyurethanes / $809.1 / $3,457.1 / $840.0 / $954.4 / $916.5 / $872.9 / $3,584.0 / $3,750.0
Advanced Materials / $323.1 / $1,734.9 / $589.8 / $607.7 / $574.1 / $576.4 / $2,348.0 / $2,450.0
Performance Products / $509.9 / $1,963.0 / $552.0 / $560.3 / $501.5 / $513.3 / $2,127.0 / $2,300.0
Pigments / $258.8 / $1,058.0 / $270.1 / $287.5 / $283.5 / $261.0 / $1,102.0 / $1,125.0
Polymers / $423.5 / $1,756.7 / $410.9 / $427.6 / $414.9 / $351.7 / $1,538.0
Base Chemicals / $447.3 / $2,530.9 / $132.5 / $133.5 / $132.0 / $625.1 / $1,021.0
Eliminations / $115.0 / $602.9 / $148.2 / $149.2 / $149.2 / $100.2 / $546.5 / $200.0
Total Revenue / $2,656.7 / $11,835.9 / $2,646.9 / $2,748.9 / $2,595.3 / $2,388.1 / $10,237.0 / $9,670.6 / $9,998.6
Digest High / $2,656.7 / $12,329.0 / $2,647.3 / $3,156.9 / $3,008.1 / $2,710.0 / $11,373.4 / $10,498.4 / $10,622.1
Digest Low / $2,656.7 / $11,753.1 / $2,646.1 / $2,230.3 / $2,096.9 / $2,057.9 / $8,488.4 / $9,175.0 / $9,375.0
Year Over Year Growth / -8.8% / -0.4% / -17.3% / -8.5% / -5.8% / -13.5% / -5.5% / 3.4%
Sequential Growth / 4.4% / 3.9% / -5.6% / -8.0%

·  For FY07, revenue forecasts by firms range from $8,488.4M (Lehman) to $11,373.4M (Citigroup), with an average of $10,237.0M ( same as in the last report).

·  For FY08, revenue forecasts by firms range from $9,175.0M (Jefferies) to $10,498.4M (Citigroup), with an average of $9,670.6M (same as in the last report).

·  For FY09, revenue forecasts by firms range from $9,375.0M (Jefferies) to $10,622.1M (Citigroup), with an average of $9,998.6M (same as in the last report).

Please refer to the Zacks Research Digest spreadsheet of HUN for specific revenue estimates.

Margins

In 1Q07, HUN reported gross profit of $407.3M, up 3% from $393.8M reported in 1Q06. Operating profit in the same quarter was $136.9M, down 28.2% from $190.7M reported in 1Q06. Pre-tax income in 1Q07 was $59.0M, down 42.2% from $102.0M in 1Q06.

Segment EBITDA details are as follows:-

Polyurethanes: The decrease in EBITDA in the Polyurethanes segment was attributed to lower MDI margins caused by higher raw materials costs, and expenses related to the ongoing outage at the China joint venture facility, and lower MTBE margins from lower average selling prices and record-high

raw materials costs. During 1Q07, the temporary shutdown of the China joint venture facility, which is undergoing repairs to replace a damaged heat exchanger, resulted in incremental expenses of approximately $12.0M.

Materials and Effects: The increase in EBITDA in the Materials and Effects segment was primarily attributed to the increase in the advanced materials business EBITDA as well as the acquisition of the textile effects business, which was acquired on June 30, 2006. The textile effects business contributed $13.1 million of EBITDA in 1Q07, while the advanced materials business contributed $44.0 million in the same period, an increase of $9.1M or 26% y/y. The increase in EBITDA in the advanced materials business was primarily due to higher margins resulting from higher average selling prices. During 1Q07, the Materials and Effects segment recorded restructuring and plant closing costs of $5.8 million versus $2.3 million for the comparable period in FY06.

Performance Products: The increase in EBITDA in the Performance Products segment was primarily attributable to increased sales volumes and lower raw materials costs in 1Q07, as compared to 1Q06.

Pigments: The decrease in EBITDA in the Pigments segment was attributed to reduced production volumes owing to a maintenance outage at Greatham, U.K. facility and lower local currency average selling prices.

Polymers: The decrease in EBITDA in the Polymers segment was attributable to lower margins, driven primarily by lower average selling prices. In 1Q07, the Polymers segment recorded restructuring, impairment and plant closing costs of $6.8M as compared to charges of $3.5M in 1Q06.

Base Chemicals: The decrease in EBITDA in the Base Chemicals segment was attributed to continuing outage at Port Arthur, Texas olefins manufacturing facility and the divestiture of certain of U.S. butadiene and MTBE assets. During 1Q07, EBITDA was negatively impacted by an estimated $21.0M related to the outage at the Port Arthur, Texas olefins facility.

The Company expects adjusted EBITDA to modestly improve in 2Q07 over that of 1Q07, attributable to seasonal patterns the Company typically experiences.

One analyst (UnionBankSwitz.) expects 2Q07 Polyurethanes segment EBITDA to be approximately $135.0M. Materials and Effects segment is expected at $69.0M, attributable to a seasonal pick-up in base resins and coatings, and continued margin improvement in Textile Effects. Performance Products segment is expected to generate an EBITDA of $66.0M. Pigments segment EBITDA is hoped to rest at $20.0M, attributable to slight softening of prices, despite good industry operating rates. Polymers segment EBITDA is expected to be $26.0M.

Margins / 1Q06A / 2006A / 1Q07A / 2Q07E / 3Q07E / 4Q07E / 2007E / 2008E / 2009E
Gross Margin / 14.8% / 13.2% / 15.3% / 16.1% / 16.9% / 17.3% / 16.1% / 17.1% / 16.4%
Operating Margin / 6.6% / 6.2% / 5.5% / 6.9% / 7.3% / 7.8% / 6.9% / 8.0% / 8.4%
Pretax Margin / 3.2% / 2.9% / 2.8% / 4.3% / 4.7% / 5.3% / 4.2% / 5.8% / 5.8%
Net Income Margin / 2.9% / 3.1% / 2.0% / 2.0% / 3.5% / 4.0% / 3.0% / 3.8% / 3.8%

Please refer to the Zacks Research Digest spreadsheet of HUN for more details on margin estimates.