UPDATE 2-Huntsman to buy Rockwood's pigments business as demand recovers
* To buy Rockwood's titanium dioxide, some other businesses for $1.1 bln
* Huntsman to take combined pigments business public eventually
* Huntsman shares up 6 pct
(Adds details from statements, background, share movement)
Sept 17 (Reuters) - Huntsman Corp said it would combine its pigments business with that of Rockwood Holdings Inc as part of a $1.1 billion deal that could mark the start of a long-expected shake-up in the volatile industry.
Huntsman shares rose 6 percent in early trading on the New York Stock Exchange. Rockwood shares were little changed.
Volatile pigment prices have started to rebound after a two-year-long slump, marked by oversupply and slackening demand from China.
Producers have been trying to restructure their titanium dioxide businesses to shield themselves from swings in prices for the pigment used to whiten everything from sunscreen to toothpaste.
Huntsman said on Tuesday it would take the combined pigment business public within two years of closing the deal, expected to be in the first half of 2014.
DuPont has said it is looking for a buyer for its pigments business while Tronox Ltd is weighing up whether to build up the business.
Huntsman said it expected demand for titanium dioxide to continue to recover in the coming quarters.
The company said the deal, which is expected to add 60 cents per share to its annual profit, would make it the world's second-largest titanium dioxide producer. Dupont is the biggest.
Huntsman will also buy Rockwood's businesses that make color pigments, and chemicals for timber and water treatment and rubber compounding. It will take on $225 million in unfunded pension liabilities as part of the deal.
The businesses together contributed $1.45 billion in revenue in 2012, accounting for about 40 percent of Rockwood's total revenue.
The deal value represents a multiple of 5.5 times estimated 2014 adjusted earnings before interest depreciation and amortization of $200 million, Huntsman said.
Anton Ticktin, a partner at boutique investment bank Valence Group, was expecting the businesses to fetch a multiple of 6-7 times, considering their specialty elements.
Rockwood, which considers its core businesses to be lithium and surface treatment chemicals, recently agreed to sell its industrial ceramics unit for $1.99 billion and clay-based additives business for $635 million.
Reuters reported on Monday that Rockwood was in advanced talks to sell its titanium dioxide paint pigment and other businesses to Huntsman.
BofA Merrill Lynch was financial adviser to Huntsman and Vinson & Elkins was legal adviser. Lazard acted as Rockwood's financial adviser, while Hughes Hubbard & Reed LLP and Willkie Farr & Gallagher LLP were its legal advisers.
Huntsman shares, which have gained 30 percent this year, rose 6 percent to $20.34 in early trading.
Rockwood shares, up 40 percent this year, were slightly higher at $66.91.
(Writing by Sayantani Ghosh in Bangalore; Editing by Joyjeet Das)