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Huntsman-Clariant Deal Scuttled

Monday, October 30, 2017

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Chemical giants Huntsman Corporation (The Woodlands, Texas) and Clariant (Muttenz, Switzerland) announced Friday (Oct. 27) that they will not continue to pursue their $20 billion merger plan, after receiving pressure from activist investors who expressed concerns about the deal’s value for Clariant.

Clariant HQ
Clariant

Swiss chemical firm Clariant has abandoned plans to merge with Texas-based Huntsman International.

Huntsman and Clariant first announced the proposed merger in May, noting that they expected it to close before the end of the year. Both companies are major suppliers of raw materials for coating formulation.

Merger Challenge

In July, activist investor White Tale, a joint venture of New York investment firm 40 North and hedge fund Corvex, began acquiring shares of Clariant, pressuring the company to look at other options for value creation. The firms said the merger with Huntsman would not create ideal value for Clariant investors.

In September, White Tale raised the stakes, increasing its stock in Clariant to more than 15 percent and penning an open letter to the company’s board in which it confirmed its opposition to the Huntsman merger. The hedge funds said in the letter that the merger had “no strategic merit” and undervalued Clariant while overvaluing Huntsman. They went on to express concerns that Clariant would cede operation control to Huntsman, “demonstrating a severe lack of due diligence with regard to Huntsman’s operational track record.”

Huntsman
Huntsman

Huntsman, founded in 1970, achieved more than $9.6 billion in sales in 2016.

Clariant said at the time that the merger would create more than $3.5 billion in value through cost and tax synergies and complementary product portfolios, and noted that while Huntsman’s president and CEO, Peter Huntsman, would become CEO of the new company, there would be no ceding of operational control along with the deal.

Peter Huntsman said that White Tale’s interests were in the “short-term, break-up value of Clariant,” and “not about Huntsman.”

According to reports, White Tale’s stake in Clariant is now more than 20 percent. That increased stake, along with other investors expressing concerns about the deal, reportedly led the company to be unsure whether a shareholder vote on the deal would result in the two-thirds “yes” votes needed to move forward.

About the Companies

Huntsman, founded in 1970, achieved more than $9.6 billion in sales in 2016. The company’s Polyurethanes division accounted for 38 percent of revenues; the Pigments and Additives division and Performance Products each accounted for 22 percent. Advanced Materials made up 10 percent of its 2016 sales, with the remaining 8 percent coming from Textile Effects.

Huntsman’s pigments and additives business was spun off at the end of July, with the business entering the New York Stock Exchange under the name Venator Materials PLC in August.

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. The company was formed in 1995 as a spinoff of chemical and pharmaceutical company Sandoz.

Activist Investors

Another activist hedge fund, Elliott Advisers, targeted Dutch coatings manufacturer AkzoNobel earlier this year when Pittsburgh-based PPG sought to merge with the firm. Elliott increased its stake in AkzoNobel to 9 percent, making it the company’s largest shareholder, while urging the company to negotiate with PPG regarding the merger plan. AkzoNobel management refused to entertain PPG’s three offers before the American firm withdrew its proposal.

Elliott sued AkzoNobel in an effort to remove board chair Antony Burgmans amid accusations that Burgmans and the board did not respond to shareholder concerns. The two parties came to an agreement in August.

Burgmans remains chair of AkzoNobel’s supervisory board, though the company has undergone a series of management changes in the months since PPG’s merger proposal. Former CEO Ton Büchner resigned in July, citing health reasons, and was replaced by Thierry Vanlancker. Chief Financial Officer Maëlys Castella took a leave of absence beginning in September, also citing health reasons, and is expected to return in a different role. Maarten de Vries was later named to the CFO role.

   

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

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