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Hedge Fund Questions Chemical Merger

Monday, July 17, 2017

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The pending merger between chemical firms Huntsman International LLC (The Woodlands, Texas) and Clariant (Muttenz, Switzerland) is being questioned by shareholders of the Swiss company.

Investment firm 40 North (New York) and hedge fund Corvex, led by activist investor Keith Meister, recently acquired 23.9 million shares (or 7.2 percent) of Clariant and are actively trying to push the Swiss company into exploring alternatives to the already agreed upon merger with Huntsman.

Clariant HQ
Clariant

Clariant and Huntsman announced the merger in May with the expectation that the deal would close smoothly.

"There are excellent opportunities to unlock value from the many high quality businesses that currently comprise Clariant," a spokesperson for White Tale, the vehicle they created to buy the stake, told Reuters.

"Unfortunately, we do not believe that the proposed merger with the Huntsman Corporation is one of those options."

Deal & Opposition

Clariant and Huntsman announced the merger in May with the expectation that the deal would close smoothly.

Both parties said at the time that they expected the deal to close by the end of the year, and that they were “confident that the required regulatory approvals can be obtained in a timely manner.”

The deal would create HuntsmanClariant, with predicted sales of $13 billion. Huntsman also plants on spinning off its Venator pigments business into an IPO, which makes some analysts consider the merger a smart move.

"Huntsman's portfolio, after the pending Venator spin-off, offers a highly complementary growth portfolio, in our view—complementary in a way that it puts both companies on a sounder, broader footing," Kepler Cheuvreux's Christian Faitz said.

However, some Clariant investors say it undermines the company’s original strategy of becoming a pure-play specialty chemicals company. The White Tale spokesperson went as far as to call the move “destructive.”

Chemical lab
Huntsman

Some Clariant investors say the deal undermines the company’s original strategy of becoming a pure-play specialty chemicals company.

Counter analysts have said the investors’ push for a counterbid is smart.

“Clariant is the No. 1 takeover target in the sector, with a long list of interested parties,” Baader Helvea Equity research analyst Markus Mayer said.

Background

Huntsman manufactures a number of raw materials for coatings formulation. In addition to the pigments and additives that will be spun off as Venator, the company’s Advanced Materials division makes resins and curing agents, mainly for industrial and protective coatings. Huntsman Performance Products offers coating components (including functional amines, carbonates and polymer derivatives) and products for concrete manufacture. And the Polyurethanes division serves the coatings and adhesives industries, as well as furniture and other industries.

Clariant achieved sales of 5.8 billion Swiss francs—about $6.01 billion—in 2016. Its business units include Pigments, Additives and Catalysts, as well as Masterbatches (color additives for plastics), Functional Minerals, Oil and Mining Services and Industrial & Consumer Specialties.

Currently, there is no date set for an investor vote on the merger, though sources claim a vote would not happen until after Huntsman spins off Venator.

   

Tagged categories: Acquisitions; AS; Asia Pacific; Business matters; Clariant; EMEA (Europe, Middle East and Africa); EU; Huntsman; Latin America; Mergers; NA; North America; Program/Project Management; SA

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